The Tron community has revealed that more than 125 million coins have so far been burned. The issuance of the TRX token is also at negative 120 million coins, equivalent to around $10 million.
Tron burning mechanism burns over 125M coins
A report from the Tron community said that the network has burned more than 125 million coins, and this number is expected to increase with the issuance of the USDD stablecoin. The USDD stablecoin will increase the burning rate following the arbitrary swap mechanism.
USDD stablecoin will have similar dynamics as Terra’s UST stablecoin. Under this mechanism, whenever one USDD is minted, $1 worth of TRX tokens will be burned. This, as a result, will increase the supply of the USDD stablecoin, enabling it to maintain its peg.
Depending on the increase and decrease in supply, it will be possible for the Tron blockchain to control the price of the USDD stablecoin. This is the mechanism used by the Luna Foundation Guard to maintain the peg for the UST stablecoin. However, following the recent occurrences with the UST stablecoin, questions have been raised over whether this mechanism is reliable.
Terra’s UST briefly loses its peg
The Luna Foundation Guard recently announced new plans for the UST stablecoin. The LFG announced that it planned to buy Bitcoin to back the UST stablecoins. The LFG plans to have $10 billion worth of Bitcoin as the reserve currency for the UST stablecoin.
However, the move is already causing concern over how UST will maintain its peg due to Bitcoin’s volatility. The UST stablecoin has been working well for a while, but recently, the price of Bitcoin dropped below $35,000, creating panic in the market, and leading to a surge in outflows from the UST stablecoin.
The increase in outflows caused UST to lose its peg briefly, and the price of UST dipped below $1. This has raised questions over the reliability of cryptocurrency-backed stablecoin, including USDD. If USDD loses its peg and fails to recover, it could cause massive losses for investors.
Nevertheless, this mechanism could positively impact the value of TRX. The value of TRX could record significant gains because of this mechanism. TRX has dipped by around 50% since November last year. The value of TRX has gained by 20% over the past week following the release of the USDD stablecoin.
Your capital is at risk.