What is USDD?
USDD is the new Algorithmic Stablecoin of Justin Sun, the big crypto whale, owner of the Tron Chain that owns TRON (TRX) as its regulatory token within its ecosystem. USDD has a similar model behind it to its UST Stablecoin. Terra has almost everything, whether it’s Algorithmic Technology, Mint&Burn. If the price of USDD is more than $1, the system will mint USDD to increase supply and Burn TRX to bring the price back to equilibrium. Also, if the price of USDD is less than $1, the system will burn USDD to reduce the supply and Mint TRX to each other.
Another analogy to the UST is that Justin Sun has set up a “Tron DAO Reserve” as a fund to support the USDD price in the event of a peg loose. Terra Chain’s LFG) is a fund to support all UST coin prices in the event of a peg loose.
What does the Tron DAO Reserve consist of?
If you remember, UST was at its peak during this time with a market cap of over $19 billion. The amount of LFG funds in UST’s buoyancy funds was not sufficient for UST’s marketcap at the time. People started to think that if one day UST dropped a heavy peg, LUNA dropped heavily, the Mint & Burn mechanism was unstable. And with insufficient reserves in the LFG fund to support the price, what will UST do for Justin Sun? Lessons learned from the UST incident led the Tron DAO Reserve to hold more than 327% of the USDD marketcap.
Alternatively, we can define USDD as “Over-Collateralized Stablecoin.” Like MakerDAO’s DAI, it has the advantage of having a substantial percentage of its underlying assets than the marketcap. This makes the market crash heavily and the Algorithmic Mint & Burn mechanism doesn’t work efficiently. The Tron DAO Reserve, which is more than 327% of the Marketcap here, will fully support the price of USDD. This greatly reduces the risk of USDD peg breakage.
The Tron DAO Reserve currently has all of its reserve funds. $2,316,787,443 It consists of 10,874,566,168 TRON (TRX) coins, TRX is approximately $710,979,136 BTC, 14,040.6 BTC is approximately 299,469,289 USDT, 140,013,886 USDT and USDC is 1,030,000,000 USDC and USD115D ,446 is seen today at $707. Given that the reserves are 3.27 times greater than the market capitalization, USDD has a low peg in terms of the amount of reserve funds.
USDD Use Case
One downside is that USDD is currently only available as a DeFi platform within the Tron Chain ecosystem, where stablecoin deposit platforms in Tron Chain offer very high interest rates compared to stablecoin deposits on other blockchains. Similar to Terra’s Anchor platform, it offers a guaranteed 18% UST deposit interest rate during Terra’s golden age.
1) JustLend, Tron Chain’s flagship Lending/Borrowing platform, has the number one balance locked in the platform. We can deposit USDD on the platform to earn about 11.4% interest on USDD. We can also use USDD as a Collateral to borrow USDD with only 3.4% interest on the loan, so we can deposit USDD together with USDD borrowing. keep looping which will earn about 27% interest
2) SUN.io, Decentralized Finance platform with the amount locked in the second platform after JustLend, we can deposit liquidity pair LP USDD/USDT to get around 33.71% return on USDD and SUN units. It is a Governance Token of SUN.io.
3) Alternatively, it will be a liquidity deposit within Curve Finance with the LP USDD/3CRV pair, which will earn approximately 33% interest in 3.3% CRV units, which is Curve Finance’s Governance Token and 29.7% USDD.
USDD Risk
Peg drop
On June 13, the USDD peg slipped to around $0.9866, terrifying investors of a repeat of Terra’s UST and declining trust in USDD because it just came to light. It’s only been 43 days since its launch, but Tron Chain owner Justin Sun has stated that the peg leak was only caused by USDD’s algorithmic Mint & Burn, which is the result of the price of all cryptocurrencies. The price dropped heavily on June 13, causing the Mint & Burn mechanism to work unstable.
In addition, during that period, the Tron DAO Reserve had a small percentage of reserve funds. This includes $351 million BTC, $140 million USDT, and $686 million TRX, totaling $1,177 million. I think Like LUNA, there is a chance that TRX will reach 0 on any given day, so investors do not look at the value of TRX in the fund at all.
As a result, the Tron DAO Reserve cut its reserve funds from investors’ perspective to $351 million in BTC and $140 million in USDT for a total of $491 million. Compared to the $722 million marketcap of USDD, people view USDD as “Under-Collateralized.”
Justin Sun announced that 700,000,000 USDC will be added to its reserves, and 100,000,000 USDC will be used to buy TRX tokens on Binance to add to the Tron DAO Reserve to build trust among investors. Today, Tron DAO Reserves announced on Twitter that they will buy an additional $10,000,000 of USDD and TRX and keep them in reserve to further strengthen the USDD price.
Despite increasing reserves to support the USDD price, on June 19, USDD dropped $0.9555 due to poor market conditions and unstable Mint & Burn mechanism, Tron DAO Reserve finally Can support USDD price coupled with investor arbitrage until now able to trade around $0.977, but still have to wait and see if USDD can return to peg at $1 and it will take a long time. How much to return Peg at $1
Reserve not enough for Marketcap
This has happened in the past with the Luna Foundation Guard (LFG), where the reserves for UST tokens were insufficient to support the UST marketcap at the time, were unable to bring UST back to the $1 peg. This is also likely to happen with the Tron DAO Reserve if USDD heats up and investor demand is enormous.
which, as has been said, If the demand for USDD is high, the system will have to mint a lot of USDD, causing the marketcap to grow exponentially. And if the USDD marketcap grows at such a rapid rate that the Tron DAO Reserve can’t find any reserves to keep it, then the USDD market cap grows too fast. More than the USDD marketcap at the time, it would have made USDD more likely to fall off the $1 peg more easily and more vulnerable to attacks like UST.
The current market cap of USDD is $706,664,140, or about 24,733,244,900 baht, ranking 64 according to the website. Coinmarketcap It used to be the highest peg at $1.03, and it was the most peg out at $0.9555. Circulating Supply was at 723,321,764.61 USDD and Total Supply was the same amount. USDD can be bought/sold/traded on leading exchanges such as Huobi, KuCoin, Gate.io, MEXC, Poloniex.
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