Stablecoin TUSD Q4 2023 Overview

Original Author: JohnTotalValueLocke, Messari

Key Points

The supply of TUSD has decreased for the first time this year to $2.3 billion, while the number of holders has remained relatively stable.

Due to the diminishing significance of TUSD in the TRON DeFi ecosystem in the fourth quarter, the interaction volume of TUSD also experienced its lowest quarter of the year.

TUSD continues to advance in transparency by introducing Chainlink's Proof of Reserves and adding a new partner at the end of the fourth quarter to provide daily reserve proof.

Introduction

TrueUSD (TUSD) is a fully collateralized stablecoin that combines the security of real-world assets with the efficiency of blockchain technology. TUSD is minted and redeemed through smart contracts while ensuring real-time on-chain verification of sufficient funds backing the coin. This process is supported by The Network Firm LLP, a U.S. auditing firm specializing in cryptocurrencies, and Chainlink's Proof of Reserve, which provides additional transparency and trust in available reserves.

Archblock (formerly TrustToken) was founded in 2017 and launched TrueUSD (TUSD) in March 2018. It aims to support cryptocurrency trading and serve as a stable store of value and medium of exchange for global transactions. In December 2020, TrustToken announced a transaction in which "the ownership of TUSD is being transferred to an Asian consortium." According to the CEO, "The acquisition of TUSD is led by Techteryx." Since July 13, 2023, Techteryx has taken over operations in all markets outside the U.S., including minting and redemption, while Archblock continues to serve U.S. customers.

TrueUSD has established its presence globally, listed on multiple trading platforms such as Binance, HTX, and Upbit, facilitating transactions across over 160 markets and more than 20 OTC platforms on five continents.

Key Metrics

Performance Analysis:

Supply and Reserves

The supply of TUSD significantly increased in the first half of the year, growing from approximately $750 million in circulation to over $2.3 billion by the end of the year. In the fourth quarter, TUSD on TRON decreased by 30%, while TUSD on Ethereum decreased by 61%. By the end of 2023, the circulating supply of TUSD on TRON was $1.9 billion and $196 million on Ethereum. The chart reflects that TUSD redemptions tend to be large-scale rather than incremental, such as the destruction of 122 million TUSD on December 7.

In February 2023, TUSD began reporting its reserves through Chainlink's Proof of Reserve. This initiative places TUSD at the forefront of stablecoin transparency. TUSD uses third-party verification, which is then reported on-chain by oracle providers here. The Network Firm is the third party providing the data. Chainlink's Proof of Reserve has three methods of reporting data: self-reported, third-party, or directly from custodians. The data comes from The Network Firm and is relayed to the blockchain through 16 oracles, with a minimum requirement of 11 oracles.

On December 28, TrueUSD announced another partnership to enhance reserve transparency. TUSD will now publish daily reserve proof through MooreHK, an accounting and consulting firm based in Hong Kong.

Pegging Situation

TUSD's average daily volatility in 2023 was less than half a cent, with a median daily volatility of $0.0028. This highlights the stability of its peg, although it lags behind more liquid competitors like USDC and USDT (which had median daily volatilities below $0.002 throughout the year). For TUSD, the volatility in the first quarter was primarily driven by regional banking crises and the de-pegging of USDC, which affected most stablecoins. In June, brief concerns over TUSD's partner bank, Prime Trust, led to a rapid sell-off of the stablecoin. Some lows in December appeared in the chart, but they were likely more reflective of low trading volumes on smaller exchanges at year-end rather than issues or pressures caused by TUSD.

Usage: Trading Volume, Holders, and TRON DeFi

The number of TUSD transactions peaked in the second quarter of this year, just before the suspension of redemptions by Prime Trust in June. In the fourth quarter, there were still over $10 billion in TUSD transfers, with over $8 billion on TRON alone. Before December, trading volume was characterized by very little activity and significant volatility. For example, although the average daily trading volume in December was $117 million, up from an average of $77 million per day in October and November, the standard deviation of daily trading volume was much lower (December was $159 million, while the standard deviation for October and November was $238 million). The median daily trading volume in December was $38 million, compared to only $34 million from January to November. The return of the bull market in December and increased trading activity should lead to more consistent usage of TUSD.

Despite the growth in TUSD's supply, the number of unique addresses holding the stablecoin on Ethereum and TRON has changed little in 2023. A significant portion of TUSD on TRON resides on Binance. By the end of the year, the three largest holders of TUSD were identified as Binance wallets, holding 97%, 1%, and 0.8% of the TUSD supply. The team is focused on growth integration and partnerships aimed at further expanding to new stablecoin users (discussed further in qualitative analysis).

Throughout the year, TUSD played a significant role in the TRON DeFi ecosystem, with hundreds of millions deposited into JustLend at various times. However, by year-end, only about 2.8 million TUSD was deposited in the three largest DeFi protocols on TRON. Nearly $49 million in TUSD was held in unmarked accounts, with approximately 90% likely in externally owned accounts rather than smart contracts. By the end of the year, 97% of TUSD on TRON was held in centralized exchange accounts.

Qualitative Analysis

Integration and Partnerships

TrueUSD (TUSD) has been actively expanding its partnerships and integrations to enhance its ecosystem and drive the adoption and growth of the stablecoin. On October 2, Binance Pay included TUSD in a promotional campaign, offering significant discounts and token vouchers to users, which may increase TUSD's visibility and utility on the platform. Subsequently, TUSD partnered with Liquid to host a Black Friday event, providing substantial discounts and rebates for users shopping with TUSD. This event further incentivized the use of TUSD as a payment method for goods and services.

Additionally, TUSD's utility has been further expanded through various strategic integrations:

• IvendPay has incorporated TUSD into its payment system, broadening its applicability in real-world transactions.

• Travel platform Travala supports TUSD, allowing purchases related to travel with the stablecoin.

In specific cryptocurrencies, Binance Launchpool projects Neutron (NTRN) and Memecoin (MEME) use TUSD for mining, which may enhance TUSD's liquidity and trading volume. The BSC-based cross-chain trading platform Biswap has also listed TUSD and created a new yield pool, increasing its availability and liquidity. Furthermore, Bybit listed TUSD and introduced zero-fee spot trading pairs along with a substantial bonus pool to attract traders to use the platform.

These initiatives collectively demonstrate TUSD's commitment to establishing a strong presence in payments, trading, and DeFi. The availability of TUSD across various platforms highlights its potential for increased adoption and the role it can play in the broader crypto economy.

Private Key Security and Vendor Data Breaches

TrueUSD (TUSD) successfully mitigated incidents following a series of security issues involving its partners and related smart contracts. A security breach at a third-party vendor reportedly exposed some user KYC and transaction data related to TrueCoin, a service managing TUSD, prior to July 13, 2023. Nevertheless, TrueCoin's system was declared unaffected, and TUSD's stability and reserves remained secure.

However, further scrutiny began when blockchain intelligence firm ChainArgos disclosed potential risks related to TrueUSD's private keys. The firm pointed out the emergence of TEURO, a contract deployed using TrueUSD's private keys, suggesting a connection to vulnerabilities acknowledged by TrueUSD. The company also expressed concerns that this compromise might not be limited to data breaches but could include access to TUSD's banking functionalities. Such a situation could threaten the peg stability of the stablecoin and user assets.

Speculation intensified due to the significant TUSD minting activity prior to the security breach (e.g., $850 million minted before the breach). This implies that TrueUSD's private keys—crucial to the minting process—might have been compromised. This incident raised questions about the security behind TUSD's reserves and the integrity of the minting process.

TUSD maintains distance from TEURO, emphasizing that the addresses used for its deployment have no authority over TUSD's smart contracts and do not affect the operation of the stablecoin. Despite this assertion, these events highlight potential risks associated with private key security. The occurrence of these events, including the creation of the TrueChineseYuan contract and the movement of TEURO tokens across various addresses, underscores the necessity of maintaining vigilance and robust security protocols in blockchain projects.

TUSD responded by reiterating its operational independence from the compromised addresses and assuring users of the continued security of their assets. As the crypto community evolves rapidly, it emphasizes the importance of exercising caution when interacting with newly deployed contracts and verifying the legitimacy of stablecoin projects.

Conclusion

For TUSD, it was a balancing quarter, with a decline in supply and usage while transparency and partnerships continued to grow. TUSD maintained its peg throughout a volatile year and continues to establish a robust reserve certification history with Chainlink's Proof of Reserve oracle. Trading volume decreased in the second half of 2023, while concentration increased, with 97% of TUSD held in Binance wallets by year-end. The year-end partnership with MooreHK will bring new daily reserve certifications for TUSD, marking another step towards security and transparency. TUSD will leverage the integrations and partnerships developed during the bear market in 2024, seeking to restore growth in usage.