The unveiling
In an open letter to the Tron community, Justin Sun the founder of the Tron community announced the new Decentralized Autonomous Organization (DAO), he cited that floating a reserve account was long overdue as it will help buffer the broader industry from market shocks and abrupt price collapse.
The Tron network has been a front runner since it’s founding but despite this Sun stated in his letter that the Tron DAO reserve will provide every blockchain protocol the needed liquidity to stay afloat in the event of a significant market mishap. He added that the reserve will start operation with $10 billion USD, he also encouraged participants to contribute to the reserve’s liquidity pool.
The purpose of the reserve
In the letter Sun wrote that;
“By fixing a decentralized blockchain reserve, we are going to be ready to assemble the ability of all blockchain practitioners through a DAO system and build this organization into the firmest protector of the blockchain industry and market. I feel this may be the most effective solution to any future crises,”
He also added that the reserve “aims to safeguard the blockchain industry and crypto market, prevent panic trading caused by financial crises, and mitigate severe and long-term economic downturns.” beyond the buffer effect of Sun’s proposal the Tron DAO reserve will also provide stability to exchange rates of centralized and decentralized stablecoins that are resident of the Tron blockchain protocol. according to him this will be achieved “by setting risk-free interest rates and regulating the market through liquidity provision.”
Sun proposed an incentivization model for participating in the DAO over time. This will serve as a reward for the liquidity providers contributing to the reserve.
The proposed USDD
While the Tron DAO Reserve has some similarities with the centralized banking-backed reserve system that serves as a financial buffer to commercial banks, there are a lot of differences between both of them. The letter outlines a decentralized governance structure that sets the idea apart from the traditional system.
Furthermore, the Tron DAO is scheduled to launch a new algorithmic stablecoin called the USDD. The proposed date for this launch is May 5 and it will further the network’s role in stablecoin development. A role which started with the launch of the Tether USDT.