USDD is an algorithmic stablecoin pegged to the US dollar managed through a TRON-based DAO founded by crypto entrepreneur Justin Sun.
USDD, which stands for ‘decentralized USD’, is managed by the TRON DAO Reserve, which is associated with the TRON blockchain. It is among the top 10 stablecoins with a market cap of $725 million.
Launched in April 2022, USDD is a fairly new algorithmic stablecoin that aims to replicate the (apparent) success of Terra’s UST. But since the collapse of the UST, the responsibility of proving how different it is from the failed stablecoin is in the hands of USDD.
Algorithmic-based stablecoins are in theory not backed by any real world assets, but instead rely on mathematical algorithms to maintain their stability. Behind such algorithms is a mechanism called seigniorage margins. Seigniorage shares are created when new coins are minted and destroyed when coins are burned.
The supply of seigniorage shares is algorithmically managed to increase when the price of the stablecoin falls and to decrease when the price of the stablecoin rises.
The idea behind seigniorage shares is that by regulating the supply-demand ratio, the stablecoin price can be fixed to a single “fixed” value without being backed by any collateral.
The value proposition of USDD is that it is not only collateralized but also overcollateralized among other mechanisms used to maintain the stability of USDD.
In fact, on October 7, 2022, it was announced that USDD had become legal tender in the Commonwealth of Dominica, a Caribbean island nation with a population of just over 70,000.
How Does USDD Work? How Is It Different From Other Stablecoins?
Where UST is mostly collateralized by LUNA, USDD is collateralized by what appears to be $580 million worth of TRX, $235 million BTC, and $442 million USDC.
This basket of assets accounts for more than 200 percent of the circulating USDD value. In other words, each USDD in the market is backed by more than twice its value. This over-collateralization aims to prevent USDD from pegging to USD.
When the price of USDD drops below 1 USD, users can burn 1 USDD for 1 USD worth of TRX. When the price of USDD is higher than 1 USD, users can burn 1 USD TRX for 1 USDD. This is to fix USDD to USD at a ratio of 1:1.
In addition, USDD offers the “Peg Stability Module”, an open source software that allows USDD users to exchange their tokens with other stablecoins such as USDT or USDC in a 1:1 ratio with zero slippage. This PSM is another mechanism aimed at increasing the stability of USDD.
Super Agents are 27 individual owners of TRX coins, the token of the TRON network, which play a role in maintaining the price stability of USDD. Through a specific mechanism, Super Representatives “take the blow” when the stablecoin is highly volatile. This process is reversible for Super Representatives who can apply for the position and are voted on by TRX holders.
How to Buy USDD?
To buy USDD, it is first necessary to know the exchanges where this cryptocurrency is listed. Then you have to create an account on one of these exchanges and log in to the account. After logging in to the account, you need to load funds into the passbook for purchases. You can use a credit or debit card for this. You can also make transactions by bank transfer.
After loading the balance, you can buy the desired amount of USDD and keep it in a hot or cold wallet. Cryptocurrency exchanges where USDD can be purchased are:
- KuCoin
- Uniswap v3 (Ethereum)
- PancakeSwap v2 (BSC)
- Huobi
- Poloniex
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