Tron (TRX) becomes the 3ᵉ DeFi blockchain thanks to its algorithmic stabecoin

The Tron ecosystem joins the DeFi podium

According to data from the DefiLlama website, tron (TRX) is now the 3rd largest decentralized finance (DeFi) blockchain by total value locked (TVL). This TVL is currently around 6 billion dollars and has increased by 50% within a month.

USDD, the new algorithmic stablecoin in the ecosystem, is no stranger to this growth. Indeed, it is possible to generate more than 20% yield with this one, by placing it as collateral on the JustLend protocol.

JustLend is the main application of this ecosystem and allows lending and borrowing the way of Aave (AAVE). Moreover, the protocol alone capitalizes 50% of Tron’s TVL in DeFi.

👉 To go further – Find our guide on the Tron blockchain (TRX)

Like a sense of deja vu

An algorithmic stablecoin and 20% yields obviously remind us of the defunct UST on the Terra blockchain (LUNA) with the Anchor protocol. Moreover, these returns are mainly generated by liquidity miningi.e. financial incentives to get us to deposit our liquidity:

Returns offered on JustLend

As shown in the illustration above, while the USDD provision is only meant to offer than 3.31% annual returns, the additional incentives bring these to 23.54%. We can therefore legitimately wonder what will happen when these incentives tend to diminish, as they did on Anchor, some time before the collapse of Terra.

Moreover, there is no guarantee that the USDD would be stronger than the UST in the event of a loss of peg, since its functioning also involves a very similar arbitration system. An arbitration which had failed to play its role in the face of speculation during the fall of the UST.

Nevertheless, it is interesting to note that investors seem to keep a cautious approach for the moment. Indeed, of the 3.2 billion dollars deposited on JustLend, the amounts borrowed represent only 10% of this sum, which implies measured risk taking.

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An ecosystem that is altogether limited in its offer

If it is possible to compare the risks of the USDD to the UST, it is however necessary to relativize. The Tron blockchain is certainly 3ᵉ, but its TVL is 5 times lower than that experienced by Terra on its April highs. For its part, Ethereum (ETH) remains far ahead with 72 billion dollars.

Also according to DefiLlama, the ecosystem founded by Justin Sun has only 8 different applications and the current performance do not bode well for long-term sustainabilityespecially given the current market situation.

It is also worth remembering that the USDD, which gave renewed interest to this blockchain, was created surfing on the popularity of the UST at its peak. Let’s hope then that he will not meet the same fate. Because although the systemic consequences would probably not be so pronounced, authorities around the world would not fail to take an additional example in their regulatory discourse.

👉 Also in the news – Tether launches a new stablecoin based on the Mexican peso: the MXNT

Source: DefiLlama, Image: JustLend

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About the Author : Vincent Mayor


I timidly discovered the world of blockchain at the end of 2018 during my quest for financial freedom. Initially invested moderately, it was only two years later that I took the gamble of betting everything on the movement that was taking shape then. I then dedicate 2021 to training myself better to acquire more knowledge and seriousness. As I often like to say: I still have a billion things to learn. And what I do know, I want to share with you.
All articles by Vincent Maire.

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