What Are the Differences Between Native TUSD and Cross-Chain TUSD?
The recent disastrous crash of UST has caused a stir in the crypto world. Some frustrated investors have probably blacklisted all algorithmic stablecoins, and this gives stablecoins pegged to the US dollar a chance to return to the center of the stage. TUSD, USDT, and USDC bucking the grievous trend have maintained their stability and demonstrated to customers the necessity of holding USD-backed stablecoins. In particular, the price change of TUSD has been stable at around 0.05% since the beginning of May, which gives its holders strong security.
TUSD has, as of today, been deployed on 11 popular public blockchains including Ethereum, TRON, Avalanche, BNB, and Polygon. It is an active player in the DeFi ecosystems of these public chains and offers customers fast and convenient services. But you may notice that TUSD always clarifies whether it is issued “natively” or “cross-chain” when going live on a new chain. What are the differences and similarities between the two? Do the two ways of issuance differ in value? Let Truly take the example of TUSD and bring you on a deep dive into these tricky concepts!
What is natively-issued TUSD?
Before we go into the details, we need to clarify what a native token is.
It refers to a coin that is required for the proper functioning of a blockchain system and represents users’ rights and benefits in the system. Well-known examples include BTC and ETH. As a blockchain is supported by nodes and miners (the latter are builders and operators of the former), it is natural that miners want returns on their investments made for the operation of the chain, and such returns translate into the costs, also known as the “gas”, for applications and transactions on the chain. Gas has to be paid in the chain’s native token.
You can pay transaction fees or for the costs of deploying DApps on a public blockchain with the chain’s native token. Another use case of the token is to reward those who run nodes to provide computing resources for the network. In addition to the native token that keeps the chain running (e.g. ETH of Ethereum), a blockchain system also hosts tokens of the applications based on it. These application tokens, like TUSD on Ethereum, TRON, Binance Chian, and Avalanche, can be native to the blockchain as well.
It is noteworthy that while most tokens can only be deployed on one particular chain, TUSD, as a USD-pegged stablecoin, can be issued natively on different blockchains. The development takes longer but ensures security.
So what kind of services and convenience will you enjoy when you hold TUSD natively issued on Ethereum, TRON, Binance Chain, and Avalanche? In the first place, exchanges that partner with the public chains mentioned above will first support the deposits and withdrawals of native TUSD, offering TUSD users more options and a smoother trading process.
A comparison between TUSD and TUSDB will help you better understand the TUSD of different chains. TUSD is built on the Ethereum blockchain and is an ERC-20 token, while TUSDB is powered by Binance Chain, a separate blockchain, and is a BEP-2 token. They serve the same functionality: both of them are pegged 1:1 to the US dollar in custody. The primary difference is that they are built to be compatible with their respective blockchains. An applicable analogy would be how the Facebook app has similar functionality on both iOS and Android, which functions the same but the developers have to build each version according to the specific technical requirements of each operating system. Similarly, TUSD on the Binance Chain and Avalanche networks are both USD-pegged stablecoins that are compatible with their respective chains.
TUSD is launched natively on the following public chains:
What is cross-chain TUSD?
To understand cross-chain TUSD, let us figure out what a “cross-chain bridge” is:
A cross-chain bridge connects different blockchains and enables the transfer of assets and files across chains, the interaction among crypto ecosystems, and the compatibility among blockchain networks.
The “bridge” is not for physical connections. It enables the transfer of files and assets by protocols and technologies that connect blockchains with different consensus mechanisms. Consensus mechanism differences among blockchain networks make it hard for users to integrate their assets which are invested and staked on different blockchains. A cross-chain solution is needed for users to reorganize or transfer assets. The need for going cross-chain is surging because users are on multiple blockchains as new ecosystems keep emerging and growing.
The most common one is a Chain-to-Chain Bridge that supports asset transfers between two major blockchains. For instance, Avalanche Bridge by Avalanche supports the transfer of assets with Avalanche and Ethereum ERC-20 standards and uses Token. e to differentiate between native and cross-chain tokens (TUSD’s symbol remains TUSD because it is native on Avalanche); PoS Bridge by Polygon supports the transfer of Ethereum-based TUSD to Polygon, so that users can participate directly in TUSD-related pools for earnings and rewards.
TUSD is issued cross-chain on the following public chains:
Comparing native and cross-chain TUSDs: How are they different and similar?
Let’s move on to the differences and similarities between native and cross-chain TUSDs.
Native TUSD tokens are directly acquired through bank minting and traded on the chains on which they are issued natively. Exchanges tend to support deposits and withdrawals of native TUSD for trade efficiency. Native tokens are also technically safer than cross-chain ones because no cross-chain steps are needed.
However, a native TUSD and a cross-chain TUSD share the same value, as both are pegged to USD at a ratio of 1: 1. Users are free to choose between the two.
That’s all about it for Truly Crypto 101 Lesson 8! If you are interested in knowing more about TUSD, feel free to spread them in the comments below!
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