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USDD is a stablecoin and digital asset on the TRON blockchain that was launched on BNB Chain, Ethereum and TRON on May 5, 2022. According to Justin Sun, the stablecoin offers investors an annual return of 30%.
Key Takeaways
USDD is a stablecoin that is pegged to the value of the US dollar, and is managed by a decentralized autonomous organization (DAO) built on the TRON blockchain.
The coin is founded by Justin Sun, a Chinese entrepreneur and founder of TRON Network.
To keep its value stable, USDD is over-collateralized with a variety of different crypto assets, including Bitcoin and USDC.
In October 2022, this currency became the official currency of the Commonwealth of Dominica.
The USDD stablecoin is a relatively new digital asset that launched on the BNB Chain, Ethereum, and TRON on May 5, 2022. The creator, Justin Sun, claims that it offers an annual percentage yield of 30%. Despite its recent introduction, it should be noted that the underlying blockchain technology, TRON, has been around for a number of years and is considered one of the largest decentralized platforms, with its own cryptocurrency. Originally established by the Singapore-based Tron Foundation in 2017, TRON initially focused on the Asian market. It has since expanded globally and now has over 50 million accounts. In terms of market capitalization, the TRON cryptocurrency currently ranks 31st among all available options.
How does it work?
1) Collateralized by crypto asset basket.
While UST was primarily secured by LUNA, USDD appears to be collateralized by approximately $580 million worth of TRX, $235 million worth of BTC, and $442 million worth of USDC.
However, it is important to note that a significant portion of the collateral, approximately 40%, comprises of Tron’s TRX token. It is crucial for buyers or investors to be aware of this and proceed with caution.
2) Over-collateralization
The USDD backings are a basket of assets, which make up more than 200% of the total USDD in circulation. This means that for each USDD in the market, there is more than double its value in assets supporting it. This high level of collateralization is there to prevent the stablecoin from losing its peg to the US dollar.
3) Mint-and-burn mechanism
USDD’s value stays at a 1:1 ratio to the US dollar through a process called burning. When the price of USDD falls below $1, users can exchange 1 USDD for $1 worth of TRX. Conversely, when its price rises above $1, users can exchange $1 worth of TRX for 1 USDD. This mechanism ensures that its value remains stable and pegged to the US dollar.
4) Peg Stability Module (PSM)
Furthermore, the coin provides a “Peg Stability Module” which is an open-source software that enables USDD holders to exchange their tokens with other stablecoins like USDT or USDC at a 1:1 rate with zero slippage. This means that the users get exactly the amount of crypto they see when placing the transaction. This PSM is another mechanism that aims enhancing the coin’s stability.
5) Super Representatives
The Super Representatives are a group of 27 individuals who hold TRX tokens and play a role in maintaining the price stability of USDD on the TRON network. This group uses a specific mechanism to manage the stablecoin’s volatility and can be voted in or out by TRX holders. The process of becoming a Super Representative is reversible.
USDD Development
The stablecoin has a four-stage roadmap which includes the Space, International Space Station, Moon and Mars stages. Currently, only details about the first two stages have released, and they focus on strategies and techniques to maintain the peg of the stablecoin. In the 1.0 Space stage, major blockchain institutions and the TRON DAO reserve take over management of the stablecoin. The TRON DAO reserve is responsible for providing custodial services for the $10 billion in liquid assets raised from partners in the blockchain industry.
These assets serve as initial reserves to ensure that the USDD rate stays stable and convertibility is possible. After the launch of TRON stablecoin on May 5, the TRON DAO reserve set the risk-free interest rate at 30% per year. They also encourage other centralized and decentralized organizations that accept USDD stablecoin to adopt relatively consistent rates, although other organizations do not require to follow Tron’s guidance.
FAQ
Frequently asked questions about USDD.
How do Stablecoins maintain their peg?
Stablecoins, such as USDT and USDC, are digital assets that strive to maintain a consistent value relative to a specific asset, like a fiat currency. Their design makes them have a fixed value, typically set at $1. The mechanics for maintaining this fixed value can vary among stablecoins. For instance, USD reserves are held in excess of the amount of USDT or USDC in circulation. This ensures that the value remains stable. This is what “over-collateralization” is
A stablecoin issuer may choose to back their stablecoin with additional reserve assets in a similar way. Commodities such as gold or other cryptocurrencies such as Bitcoin or Ethereum can also be used as reserve assets. For example, the decentralized stablecoin DAI from MakerDAO has heavy collateral and support by Ethereum (ETH) reserves.
Who are USDD’s founders?
The USDD cryptocurrency was created by Chinese entrepreneur Justin Sun, who is also the founder of the TRON Network. TRON established in China in 2017. Its initial coin offering took place prior to the Chinese government’s ban on ICOs. Following the launch of TRON, Sun created the stablecoin.
After earning a BA in History from Peking University and an MA in Political Economy from the University of Pennsylvania, Sun has gained significant recognition in the business world. In 2019, he made headlines by winning an auction lunch with investor Warren Buffett, spending over $4.5 million to secure the highest bid.
After the lunch in January 2020, Sun tweeted. In December 2021, the Caribbean nation of Grenada announced Sun’s appointment as its new World Trade Organization (WTO) ambassador, following which he retired from his position as TRON’s CEO.
How do I buy USDD?
If you’re interested in the USDD stablecoin, you have several options for purchase on various cryptocurrency markets. Some of the main markets to buy USDD on include Bybit, Gate.io, Poloniex, KuCoin, and Huobi Global. Currently, its price is fluctuating between $0.97 and $1.00, with a temporary deviation from the $1 peg in the middle of June.
To start buying on an exchange, you need to create an account by providing an email address and a mobile phone number for multi-factor authentication. After your account sets up, you must deposit funds to the platform, which you can use to purchase USDD. The current market cap and circulating supply of the coin determines the USDD price. Check USDD price chart here to view its USD price. The highest price fluctuations with USDD happened in June of 2022.
How many USDD are there circulating?
At the current time of writing, there is about 713,421,321 USDD in circulation. The market cap needs to stay around the same number to give out the current price of 1$ as per the peg.