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Introduction to TUSD
Stablecoins bridge the world of cryptocurrency and fiat currency, as their value is pegged to a reserve asset, such as the U.S. dollar or gold. They’ve gained significant popularity as a method of holding and transacting value in the cryptocurrency ecosystem. One such stablecoin is TrueUSD (TUSD), a USD-backed digital currency.
TUSD uses Chainlink’s Proof of Reserves (PoR) technology for real-time on-chain verification of its off-chain reserves, bringing end-to-end transparency to its peg with the U.S. dollar. Additionally, its compatibility with over ten blockchain networks and integration with several DeFi platforms makes it attractive for users seeking stability amid cryptocurrency volatility.
What Is TUSD?
TUSD is a stablecoin that is pegged 1:1 to the U.S. dollar. TUSD achieves this by holding an equivalent amount of USD in reserve for every TUSD token in circulation.
TUSD is based on the widely used ERC-20 token standard, making it compatible with various blockchain networks and decentralized applications (DApps). Like other stablecoins, TUSD aims to enable users to enter and exit cryptocurrency markets without the delays common in traditional bank settlements. Investors can trade TUSD for other coins in crypto markets. It also bridges the gap between crypto and fiat currencies without the inherent volatility of cryptocurrencies.
How Does TUSD Work?
TUSD operates using smart contracts on the blockchain, enabling the issuance and redemption of a tokenized version of the U.S. dollar. When users wish to buy TUSD, they must first transfer USD to a designated bank account. Once the transfer is received, a smart contract will automatically generate and send the corresponding amount of TUSD tokens to the user's wallet, effectively adding them to the circulating supply of tokens.
When a user sells their TUSD, a smart contract instantly eliminates the redeemed tokens by burning them, permanently removing them from TUSD's circulating supply. Simultaneously, the platform credits U.S. dollars to the user.
One of the advantages of utilizing TUSD is that it doesn't impose fees for purchasing or redeeming transactions. The firm earns its income by accruing interest on the U.S. dollars held in its accounts.
When a user buys TUSD on a cryptocurrency exchange, they are essentially purchasing TUSD tokens from another holder on the secondary market. The transaction takes place within the exchange's internal ledger and doesn't directly interact with the underlying TUSD smart contract on the Ethereum blockchain.
How Safe Is TUSD?
In February 2023, TUSD became the first USD-pegged stablecoin to implement automated minting control using Chainlink Proof of Reserve (PoR). PoR allows the automatic validation of USD reserves to confirm adequate collateralization. By integrating PoR, TUSD aims to enhance its stablecoin minting process with added transparency, risk management, and security layers.
Features of TUSD
The expansion of TUSD across various blockchain networks has contributed to its adoption and utilization in decentralized finance (DeFi) applications. Currently, TUSD can be found on multiple blockchain networks such as BNB Chain, Polygon, Avalanche, Tron, and Ethereum.
The characteristics that differentiate TUSD from other cryptocurrencies are:
Consistent Value: TUSD is a stablecoin that’s pegged to the U.S. dollar at a 1:1 ratio.
Collateral Backing: TUSD promises to be fully backed by U.S. dollars, U.S. dollar equivalents, and highly liquid short-term investments such as T-bills, ensuring that each TUSD token issued has a corresponding value held in reserve.
Transparency: TUSD is committed to transparency by having its reserve holdings attested by independent auditors in real-time. Users can access the relevant data via the TUSD official website anytime.
Easy Conversion: TUSD can be exchanged for USD. Both individual and corporate users can register to mint or redeem TUSD at any time through the official website.
Efficient Transactions: The underlying robust blockchain infrastructure can provide faster and more affordable transactions than traditional banking methods.
These features make it more efficient to use TUSD in the following ways:
Mint: Users can mint TUSD tokens by depositing USD. This ensures a 1:1 backing of each TUSD token with the U.S. Dollar.
Hold: Holding TUSD tokens allows users to hedge against the volatility of other cryptocurrencies, providing a stable store of value.
Trade: TUSD can be traded on cryptocurrency exchanges and markets, making it accessible to many users.
Staking, Farming, and Mining: Users can also stake, farm, or mine TUSD on DeFi platforms, which opens up opportunities for earning rewards and passive income.
How Can Users Trade TUSD?
Users can purchase and exchange TUSD for USD or other assets by using a cryptocurrency exchange such as Binance. In this case, the user would follow the exchange's procedures and guidelines to complete the process. Binance allows users to trade TUSD/BTC without additional fees.
TUSD's Integration With Blockchain Networks
TUSD is compatible with multiple blockchain networks, including Ethereum, TRON, Avalanche, BNB Chain, Fantom, and Polygon. This cross-chain compatibility allows users to transfer and use TUSD across different platforms and protocols to build new use cases for it.