USDD - another unstable stablecoin?

USDD is probably the next big stablecoin exit scam in history.

USDD, the decentralized algorithmic stablecoin based on Tron network has been growing since it launched earlier this month.

Its market capitalization currently hovers around $602m and continues to grow steadily despite the bearish market and UST's crash. Its growth can be mainly attributable to one reason: promising high yields that are higher than Anchor's.

What is USDD?

USDD is a cryptocurrency, branded as a decentralized stablecoin protocol launched on Tron network. According to its whitepaper, it is launched by the TRON DAO Reserve with a native incentive mechanism to self-stabilize against any price fluctuation.

How does USDDD achieve price stability?

USDD is issued natively on Tron, with TRX as the blockchain's native token.

The USDD protocol uses TRX as the base currency to price USDD and targets a stable price of 1 USD. When USDD's price is less than 1 USD, users and arbitrageurs could swap 1 USDD to 1 USD worth of TRX in the protocol.

Conversely, when USDD's price is greater than 1 USD, users and arbitrageurs could swap 1USD worth of TRX to 1 USDD in the protocol.

In addition to these arbitrage profits, Super Representatives (SRs) on TRON provide stability for USDD by absorbing short-term price volatility.

The protocol rewards them with fees incurred from stablecoin swaps and TRX-stablecoin swaps. Each swap between USDD and TRX will incur a fee (0.5% at the minimum). The protocol will maintain stability under extreme market volatility by automatically adjusting the fee rate.

How to obtain USDD?

USDD can be purchased on multiple cryptocurrency exchanges like Gate.io, Poloniex, KuCoin, and Huobi Global.

Once purchased, you can withdraw USDD via the Tron network to your Tron wallet.

Alternatively, USDD can also be purchased over a DEX such as Curve. The USDD/3CRV pool currently has ~$38m of liquidity to support entries and exits.  

USDD/3CRV pool on Curve

Stake USDD for 20-30% APY*

Warning: Extremely high risk!

There are a variety of ways to earn a relatively high yield on USDD.

For example, you can stake USDD on JustLend for 23% APY.

JustLend is a money market protocol on Tron. Suppliers of USDD on JustLend can earn a yield on their USDD by lending them to borrowers on the protocol.

JustLend USDD market

Those looking for liquidity pooling could stake USDD/USDT LP on Sun.io, an integrated DEX ecosystem on Tron. Currently, this strategy pays about 17% to 24% APY.

Staking USDD/USDT LP on Sun.io

Risks of USDD

While USDD is branded as a stablecoin, crypto natives and those burnt by LUNA and UST collapse would know that USDD's value is backed by nothing, and the stability of the token at 1 USD is indeed questionable - if the peg breaks, would we see a death spiral as well?

As long as Tron's TRX market capitalization is higher than USDD's, it can be argued that there is sufficient backing for USDD. Currently, Tron's market capitalization is roughly ~$7B, and therefore, USDD has room to grow.

However, once USDD's market capitalization soars to roughly half of Tron's, it gets extremely risky. If there is insufficient capital to facilitate exits from the protocol, you can be sure that you are likely to lose all your money.

Conclusion

Despite its risks and mechanism similar to LUNA and UST, capital continues to chase stable coins with high yields. For degens among us, at least in the short term, there's money to be made. But those left holding the bag would be badly burnt, as if the industry hasn't learnt its lessons.