What is TUSD? Exploring crypto's pioneering USD-pegged stablecoin

Stablecoins, aptly named for their design that aims to reduce volatility, provide a more reliable form of cryptocurrency. This stability comes from being pegged to a fiat currency such as the US dollar or a commodity like gold. Because the coin's price tracks the price of its "peg," its value is generally more stable than coins such as Bitcoin (BTC), Ethereum (ETH), and Solana (SOL). It's easy to see why stablecoins are growing in adoption among traders and finding a variety of new use cases.

True USD (TUSD) is among the leading stablecoins out there today and a pioneering force in the crypto space. As of February 2024, TUSD is the fifth largest stablecoin by market cap. As crypto continues to grow in influence and gain mainstream adoption, could TUSD's prominence and utility also rise?

In this article, we’ll explore what TUSD is, how it works, and why more people are adopting the asset in larger numbers.

A closer look at TUSD

TUSD has steadily gained popularity over the last few years. It's been designed to bring stability and trust to payments on blockchain networks by using its 1-to-1 US dollar peg. TrustToken and PrimeTrust, the companies issuing the asset, can provide proof of funds to financial regulatory bodies such as Financial Crimes Enforcement Network (FinCEN). This makes it safer to store value for those who trade hundreds of thousands or millions of dollars worth of crypto.

TUSD, as a stablecoin, also offers a reliable alternative to more volatile cryptocurrencies as it eliminates price fluctuations that are sometimes seen from traditional digital currencies. Overall, True USD represents an innovative means of transacting securely and easily on blockchain networks.

History and purpose of TUSD

Launched in 2018 after extensive collaboration between TrustToken and PrimeTrust, True USD (TUSD) emerged as a contemporary digital currency tackling persistent issues associated with fiat currencies. This stablecoin is intricately tied to real-world economic assets, facilitating global transactions with instantaneous transfers between crypto wallets. The core concept behind TUSD is to offer a secure and reliable stablecoin that harnesses the benefits of cryptocurrency while sidestepping the inherent challenges of fiat currency instability.

With its adaptability, TUSD accommodates both individual users and institutional traders, presenting a valuable alternative and features that may not be possible from conventional forms of payment. Drawing from years of experience in the blockchain industry, TrueUSD introduces a novel approach to storing value in free or low-inflation economies.

Advantages of using TUSD

TUSD's peg to the US dollar underpins its main advantages. By being connected to traditional currency systems and holding real US dollars stored in escrow accounts that are regularly independently audited, TUSD offers users stability and trust from their transactions.

The legal safeguarding of these funds mitigates custody risks often associated with other cryptocurrencies. Additionally, TUSD stands out among stablecoins with its remarkably low overall transfer costs, making it an optimal choice for businesses engaged in international payments or financial services. Notably, TUSD opens avenues for staking, farming, and mining on SunSwap, a decentralized finance (DeFi) platform spanning both Ethereum and TRON blockchains.

What are the disadvantages of TUSD and other stablecoins?

Like any other cryptocurrency, TUSD and competing stablecoins aren't without their risks. Although they're hailed for their ability to offer stability and provide seamless transactions, it's imperative to explore the nuanced landscape of potential pitfalls inherent in these digital assets.

1. Centralization

TUSD, like USDT and USDC, are forms of centralized stablecoins, which means a single entity has control over their issuance and management. Not only is this at odds with the decentralized foundations of cryptocurrency, it can lead to the risk of censorship and mismanagement from the controlling entity.

2. Dependence on the pegged asset

Although the pegged asset brings stability to stablecoins, the reverse is also true. Should the peg asset experience volatility causing its value to drop, the stablecoins pegged to it will also fall. This is true even if sentiment towards the stablecoin is positive and the wider crypto market is bullish.

3. Lack of user protection

In traditional finance, users generally benefit from consumer protection laws and regulations that are designed to make sure of fair treatment. Financial institutions are obliged to protect their customers in line with these laws and regulations. However, as decentralization removes intermediaries, it's sometimes unclear what entity is accountable to stablecoin users. That can bring the risk that in the case of fraud or malicious acts, users are on their own.

4. Regulatory Uncertainties

Stablecoins operate in a regulatory gray area, subject to evolving guidelines. Changes in regulatory landscapes can impact their legality and functionality, posing uncertainties for users and issuers alike.

Navigating stability: a comparative analysis of TUSD, USDT, and USDC

While TUSD is recognized as a robust stablecoin pegged to the US dollar, it coexists alongside its counterparts, USDT and USDC. Understanding the nuances between these three coins is important for any trader.

1. Tether (USDT): Established in 2014, USDT is the oldest and most widely adopted stablecoin among the trio, boasting a substantial market cap of $96.17 billion as of February of 2024. Created by Tether, USDT holds a prominent position in the stablecoin landscape.

2. USD Coin (USDC): Introduced in 2018 by Circle and Coinbase, USDC has swiftly risen to become the seventh most valuable token by market cap as of February 2024. Recognized for transparency and trustworthiness, USDC's reserves, held by regulated financial institutions, undergo frequent audits, validating the token's robustness.

3. True USD (TUSD): Though not as established as its counterparts, TUSD is gaining momentum. By June 2023, its circulating supply exceeded $3 billion, propelled by the introduction of TUSD farming pools on Megaton Finance. Positioned as the most transparent stablecoin, TUSD takes pride in being the first USD-pegged stablecoin to implement real-time attestations for its underlying reserves, verified by independent third-party institutions. This commitment to transparency sets TUSD apart in the competitive stablecoin landscape, attracting a growing user base. As of February 2024, its market cap stood at $1.47 billion.

TUSD vs USDT vs USDC

TUSD isn't the only stablecoin that's pegged to the US dollar. USDT and USDC also share the same peg, making each a viable alternative to the next. What are the main differences between the three coins?

USDT was created by Tether in 2014. It's the oldest and most widely used of the trio, with a market cap of 88.8 million at the end of 2023. USDC, meanwhile, is issued by Circle and Coinbase, and was released in 2018. As of December 2023, USDC was the sixth most valuable token by market cap. USDC is considered by many to be one of the most transparent and trustworthy stablecoins. Regulated financial institutions hold its reserves, which are audited frequently to validate the token's strength.

TUSD may not be as well-established as USDT or USDC, but it is growing in adoption. In June 2023, the token's circulating supply crossed $3 billion, helped by the launch of new TUSD farming pools on Megaton Finance in the same month. TUSD markets itself as the most transparent stablecoin, being the first USD-pegged stablecoin to apply real-time attestations for its underlying reserves from independent third-party institutions.

How to get started with TUSD

Getting started with TUSD is a straightforward process. You first need to mint TUSD or acquire it through one of its partner exchanges. While minting TUSD with US dollars, the smart contract creates and issues the equivalent amount of TUSD. The amount is added to part of the token’s overall circulating supply.

The final word

TUSD is preferred by many crypto and traditional traders looking for stability. It can be transacted across borders with ease, which makes it attractive in global markets. Using TUSD as a medium of exchange could allow you to protect against volatility and minimize risk. TUSD has many use cases, making it an increasingly important asset in the new digital economy. Traders are drawn to its decentralization and trustlessness, making it ideal for those who want reliable value storage.

Each financial decision is unique, and exploring TUSD's potential requires a personal touch. Take the time to conduct thorough research, understand the market dynamics, and evaluate how TUSD aligns with your financial goals.