The U.S. dollar peg of TRON's decentralized stablecoin USDD dropped by approximately 1 percent. Founder Justin Sun has reassured the community that the TRON DAO reserve will safeguard USD against a de-peg.
Sun informed the community that a planned action had been accelerated and the decentralized stablecoin USDD was changed to avoid a similar fate as Terraform Lab's UST following the collapse of Terra's LUNA.
In the previous two weeks, TRON's decentralized stablecoin gained news for its excessive USDD collateralization. On Tuesday, however, the stablecoin saw a de-peg, falling nearly 1 percent from its $1 peg.
Sun guaranteed consumers that the TRON DAO Reserve would be quite active on the market.
The algorithmic stablecoin debuted in May 2022 and made the decision to increase transparency and add collateral to prevent a crash.
According to CoinGecko and Usd.io, the estimated USDD supply in circulation is $723 million. The collateralization ratio as of June 13, 2022 is shown to be 278.58%. On June 12, 2022, TRON launched with a minimum collateral ratio of 130%.
"For the market's extreme situation, Tron DAO Reserve has received 700 million USDC to defend the USDD peg. Now USDD collateralization rate is almost 300%," the organization said in a tweet, Tuesday.
The collateral ratio is the ratio between the issued stablecoin and the collateral. Experts and crypto Twitter users believe this is a bug.
A member of the worldwide team of coders and experts at Proximity Labs has stated that the USDD collateral ratio is wrong.
FatMan, a Terra community whistleblower who studied the collateral ratio, asked his followers whether the USDD burnt collateral was hard-coded to reflect a fully supported USDD supply despite the declining TRX price.
Since the "burned" collateral has the same value as the USDD supply, the whistleblower claims that it may be a deliberate design rather than an error.
Sun told the community that the TRON DAO Reserve will deploy funds to defend TRX from the funding rate of the asset being shorted on Binance following the USDD de-peg.
Therefore, TRON DAO will deploy $2 billion to combat short positions on Binance and a negative 500 percent APR. Sun warned his followers of an imminent short squeeze.
Some 800 million USDC have been added to the DAO's reserve to protect the peg of the decentralized stablecoin USDD.
The TRON DAO reserve has deployed $800 million USDC to Binance as of the time of writing.