Topics Stablecoin
Bybit Learn
Bybit Learn
Intermediate
May 25, 2022

What Is USDD: The 30% APY TRON Stablecoin From Justin Sun

In April, Justin Sun introduced the USDD stablecoin to the market. This coin is set to be part of the TRON blockchain and is meant to function like the price of the U.S. dollar or a currency such as gold. As an algorithmic stablecoin, USDD is similar to UST, the Terra stablecoin that was the largest of its kind until early May. Because of how new and untested the TRON stablecoin is, it may seem daunting to consider investing in the TRON stablecoin. In this article, we’ll learn more about what USDD is and what it can do for your long-term goals if you choose to invest in it.

What Is USDD?

USDD is a TRON stablecoin and digital asset that launched on BNB Chain, Ethereum and TRON on May 5, 2022. Justin Sun claims that USDD will provide investors with an annual percentage yield of 30%.

Since the USDD stablecoin was just introduced in late April, it doesn't have a lengthy history. However, the TRON blockchain has been around for years and is among the largest decentralized platforms, with its own cryptocurrency. When the Singapore-based Tron Foundation introduced TRON in 2017, it was initially marketed to Asia. Since that time, the platform has gone global and now boasts over 50 million accounts. When taking market capitalization into account, the TRON cryptocurrency ranks 31st among all options.

Looking specifically at USDD, it’s a TRON stablecoin that will be available across several different networks. There are a wide range of different stablecoins that you can select from, which include everything from

Binance USD to Tether. The reason why the USDD stablecoin is considered to be similar to UST is because both of these options are algorithmic stablecoins, which work by maintaining price stability through algorithms as well as smart contracts that are able to manage the number of tokens in circulation. 

The algorithmic stablecoin system reduces the total number of tokens available once the price dips below its preferred value. In the event that the token’s price goes higher than the preferred price, more tokens will be put into circulation to alter the stablecoin's value enough for it to dip to the correct price. The purpose of using an algorithmic stablecoin is to have more control over a coin's supply and demand.

Who Is Justin Sun?

As the founder of TRON, Justin Sun is a business executive and entrepreneur who's mainly known for developing TRON in 2017 as a blockchain DAO ecosystem. Sun is also the CEO for the file-sharing program known as BitTorrent. He earned a spot on the Forbes 30 Under 30 list in Asia and China back in 2017. Since earning a Master of Arts from the University of Pennsylvania in 2013, Sun has been a key figure in the cryptocurrency industry.

He has also been involved in his fair share of controversies over the years, the latest of which is central to the TRON stablecoin. When this stablecoin was first announced in late April, many crypto holders claimed that the stablecoin was a copy of Terra's UST stablecoin. Despite these claims, Do Kwon, the founder of Terra, has stated that he welcomes the initiative and hinted at the possibility of a TRON partnership at some point in the future.

How Does USDD Work?

Now that you have an idea of what USDD is, let’s learn more about the way it works, and how it's able to maintain its price. The USDD stablecoin is set to be available on TRON, Ethereum and Binance Smart Chain. This digital asset was also launched with the assistance of other key blockchain parties. Justin Sun claims that the USDD stablecoin is going to be among the most decentralized stablecoins in history. To create the USDD stablecoin, TRON pooled all of its resources to develop USDD. As an algorithmic stablecoin with a solid mathematical algorithmic foundation, higher token prices will result in additional tokens being issued to bring the TRON stablecoin value down.

The USDD stablecoin is directly managed by TRON DAO and is set to be pegged to the U.S. dollar at a 1:1 ratio, which means that the value of this digital currency is tied to the value of the U.S. dollar. If you've invested in Terra's UST before, the USDD stablecoin functions almost just like the Terra UST. Both of these are algorithmic stablecoins.

When the stablecoin dips below the aforementioned peg ratio, users are given the opportunity to redeem a single USDD for one U.S. dollar. When the price of the stablecoin goes higher than the $1 pegged amount, it's possible to trade one U.S. dollar for one USDD.

TRON DAO’s Four-Stage USDD Plan

At the moment, the USDD stablecoin is expected to adhere to a four-stage road map. These stages are separated into the Space, International Space Station, Moon and Mars stages. At the moment, details are only known about the initial two stages, and are centered around the strategies and management techniques that will allow the USDD stablecoin to remain pegged.

During the 1.0 Space stage, USDD stablecoin management is given to major blockchain institutions as well as the TRON DAO reserve. The TRON DAO reserve delivers custody service of the $10 billion in liquid assets that were raised from partners in the blockchain industry.

These assets are used as early-stage reserves to make sure that the USDD rate remains stable and that convertibility is allowed. Once the TRON stablecoin was launched on May 5, the TRON DAO reserve set the risk-free interest rate at 30% per year. They’re also encouraging other centralized and decentralized organizations that accept the USDD stablecoin to implement relatively consistent rates. Keep in mind, however, that other organizations don't have to adhere to Tron's guidance.

USDD vs. UST

Since USDD and UST are both considered to be algorithmic stablecoins, they have many similarities. In fact, the USDD stablecoin road map is almost the same as the UST road map. Despite their similarities, there are also several differences to be aware of before selecting a stablecoin to invest in. To better understand the similarities and differences between these two stablecoins, let’s look at the primary differences between USDD and UST.

USDD is TRON’s stablecoin which maintains stability with the use of smart contracts and algorithms. TerraUSD (UST) is another algorithmic stablecoin that's completely decentralized, and is available on the Terra blockchain. This is a yield-bearing and scalable coin that's pegged directly to the U.S. dollar.

Other than the algorithmic methods that are used to help UST maintain its value, the main similarity between UST and the USDD stablecoin is that both of these stablecoins are pegged to the U.S. dollar. Terra is aiming to form an extensive ecosystem around UST and LUNA. While considering the differences between UST and the USDD stablecoin, the APY for these coins is set at 19.5% and 30% respectively.

TRON uses Oracle via the Super Representatives mechanism. This mechanism gives Oracle the ability to display the USDD price directly on the Tron network. A coupon is submitted that shows the current exchange rate of USDD to USD.

USDD Tokenomics

USDD tokenomics are fairly straightforward. In fact, if you have any previous experience investing in UST with Terra, you’ll have a decent understanding of USDD tokenomics. The USDD stablecoin is built directly on the TRON blockchain. Users can swap or trade their TRX coins to receive USDD currency.

The value of USDD invariably fluctuates over time, since its value is driven by demand and supply. The current value of USD also plays a role in USDD’s current value. When the value of USDD exceeds one U.S. dollar, more coins will be placed in the market to keep the price relatively stable.

USDD Prices from Launch to the Present

In the weeks since its initial launch, the TRON DAO reserve has purchased nearly $40 million TRX, which amounted to more than 500,000,000 coins. This purchase was made on behalf of the TRON DAO reserve. The reason that Tron purchased these coins from its own market was to safeguard USDD and the blockchain industry as a whole.

At the moment, the total supply of USDD is just over 500 million. The value of USDD is stable at the moment, with a price that's somewhat higher than the U.S. dollar. As such, the total market value of this TRON stablecoin is a little more than $500 million. Even though the market capitalization of Terra's UST is considerably higher at the moment, the USDD stablecoin has only been around since early May, and should continue to increase for the foreseeable future.

During the most recent 24-hour period, nearly $190 million of the TRON stablecoin was traded, which marked a 37% increase from the day before. When looking at historical USDD data, the market has opened at $1.00 more often than not. The lowest opening was around $0.9971, which occurred on the first day of trading. When the stablecoin first launched on May 5, it had a market capitalization of a little over $127 million. Since then, it has increased to a market cap of around $500 million.

Is USDD a Good Investment?

Even though the TRON stablecoin is relatively new and has been on the crypto market for less than a month, there are already signs that can help you determine if USDD is a good investment, or one that you should avoid. With this information in mind, you can make a more informed decision as to what's best for your portfolio.

Based on everything we know about USDD up until this point, it's a great investment opportunity as long as you understand the inherent risk that comes with investing in any cryptocurrency. Markets are generally volatile. However, the manner in which USDD was implemented means that the price of the coin should remain relatively stable in the future. Since USDD is pegged with the U.S. dollar, the price of this stablecoin should continue to remain almost 1:1 with the value of the dollar.

Keep in mind that obtaining returns which match the intended APY of 30% will require you to engage in mining. Even though some crypto investors have accused Justin Sun of creating a stablecoin that almost mirrors Terra's UST, you should expect the USDD stablecoin to have a similar performance when compared to most other stablecoins that are currently on the market.

Where and How to Buy USDD

If you would like to invest in the USDD stablecoin, you can do so from a wide range of different cryptocurrency markets. The market you choose largely depends on which one you prefer. The primary marketplaces you can purchase USDD with include Bybit, Gate.io, Poloniex, KuCoin, and Huobi Global. At the moment, the price is mostly oscillating between $0.97 and $1.00, with a momentary depegging period in the middle of June.

The first step to buying on a marketplace like Bybit is to create an account. You can do this in just a few minutes, as long as you have an email address and a mobile phone for multi-factor authentication. Once your account is up and running, you’ll need to on-ramp your funds. You can then use these crypto holdings to buy USDD within the platform.

The Bottom Line

Now that you have a better idea of what USDD is, you have the info required to determine if the USDD stablecoin is right for you and your crypto portfolio. While this stablecoin is relatively new, it offers some distinct advantages that may pay dividends in the future. As an algorithmic stablecoin, USDD is very similar to the UST stablecoin. If you have knowledge of how to properly utilize UST, this can work as the basis of your USDD investments.