Algorithmic stablecoin USDD - a risk to Tron, TRX, and the entire crypto market?

[KryptoBull]

We are no longer unfamiliar with algorithmic stablecoins like UST and the devastation of its collapse on LUNA and the Terra ecosystem. A few other algorithmic stablecoins were also introduced in that wave but did not really stand out, currently, I only know of USDD on Tron ^[1].

Initially, USDD was designed with its value backed by a diversified reserve pool, including both BTC and TRX. However, after nearly 12K BTC was withdrawn from the reserve pool recently, USDD is now solely backed by TRX - Tron's native token, raising concerns among the crypto community about a potential black swan event just before the market experiences an uptrend and altseason ^[2].

Although the USDD cap is only around 750M USD, not reaching the 18B USD of UST before its collapse, the issues with USDD could easily spread to other projects within the Tron ecosystem. In the worst-case scenario, it could even affect the liquidity of TRC-20 USDT if Tron were to fail like Terra. Personally, I don't trust nor use USDD, but I hold USDT in my account, so I'm quite worried about this risk. Perhaps I should consider USDC, as USDC no longer operates on Tron and would not be affected even in the worst-case scenario involving USDD and Tron.

The decision of the Tron DAO Reserve was not based on a community vote, and this undermines the the principles of decentralized governance. I'm not surprised anyway because Justin Sun rarely keeps his promises, he's not a trustworthy person. This even made me stay away from TRX despite its strong recovery for over a year.

I want to know your opinion on this issue:

• Do you believe in the future of algorithmic stablecoins?
• Are you still using USDD or other algorithmic stablecoins?
• If it collapses, could USDD negatively impact the entire crypto market?

References:
[1] Algorithmic Stablecoin Tokens
[2] Justin Sun's USDD stablecoin is no longer backed by bitcoin
Note:

• My opinion has been presented in a topic, on BitcoinTalk forum.
• This topic on AltcoinsTalks forum has included a minor change in the way my opinion is presented.
• This statement is to avoid accusations of plagiarism.

[MrSpasybo]

I want to know your opinion on this issue:

• Do you believe in the future of algorithmic stablecoins?
• Are you still using USDD or other algorithmic stablecoins?
• If it collapses, could USDD negatively impact the entire crypto market?

1. I know DAI - an algorithmic stablecoin on Ethereum, but its mechanism is quite stable and secure when investors need to lock tokens as collateral to borrow DAI. Then, depending on market fluctuations, those tokens can be liquidated to ensure that each DAI is backed by assets worth $1.

2. I've never touched algorithmic stablecoins, especially UST, USN, or USDD. Their models have too many problems and only work well when the market is continuously growing and stable. If they are attacked with liquidity, the algorithms can lead to a rapid death spiral for the algorithmic stablecoin.

3. I think the collapse of USDD won't have a very serious impact on the crypto market because its market cap is very small, less than $1B, and it's not very well-known. Of course, I don't know the exact status of the networks using USDD. In the case of UST, many funds had invested in UST and its collapse caused many other lending projects to fail as well.

[KryptoBull]

1. I know DAI - an algorithmic stablecoin on Ethereum, but its mechanism is quite stable and secure when investors need to lock tokens as collateral to borrow DAI. Then, depending on market fluctuations, those tokens can be liquidated to ensure that each DAI is backed by assets worth $1.

2. I've never touched algorithmic stablecoins, especially UST, USN, or USDD. Their models have too many problems and only work well when the market is continuously growing and stable. If they are attacked with liquidity, the algorithms can lead to a rapid death spiral for the algorithmic stablecoin.

DAI has been in the crypto market for a long time but thanks to a fairly good collateralization model, it has always maintained its peg. At the same time, DAI has not created a financial hole like UST did when UST was pegged to USD via LUNA price. The failure of UST was predicted beforehand, but unfortunately, many investors still could not resist the allure of a 20% annual return on Anchor.

Currently, USDD is the only one that is truly famous and has a large market cap in the algorithmic stablecoin group. I hope it doesn't have any problems, or if it does, it will collapse quickly and not drag down other projects or the overall market sentiment.

[erus]

Currently I just heard about USDD from OP because I have never heard of it before. I only know USDT, USDC, DAI, FDUSD which are on Binance. Maybe the algorithm of USDD which tends to be risky can be avoided because I have also just heard about it. I personally don't want to hold USDD and if forced to choose maybe I will just choose USDT.

[KryptoBull]

Currently I just heard about USDD from OP because I have never heard of it before. I only know USDT, USDC, DAI, FDUSD which are on Binance. Maybe the algorithm of USDD which tends to be risky can be avoided because I have also just heard about it. I personally don't want to hold USDD and if forced to choose maybe I will just choose USDT.

USDD isn't really that well-known, and its market capitalization is less than $1 billion. You might not be familiar with it because you probably don't follow the dramas in this market. I also don't use or interact with USDD, I only know about it because Justin Sun wanted to join the algorithmic stablecoin trend similar to Terra's UST to boost DeFi development in the Tron ecosystem.

I don't fully understand USDD's algorithm, but I'm worried that it still carries some risks similar to UST and could lead to investor losses in certain scenarios. As an investor, I don't want to take on that kind of risk. There are plenty of other stablecoin options in the crypto market that I can use with peace of mind.

[erus]

Currently I just heard about USDD from OP because I have never heard of it before. I only know USDT, USDC, DAI, FDUSD which are on Binance. Maybe the algorithm of USDD which tends to be risky can be avoided because I have also just heard about it. I personally don't want to hold USDD and if forced to choose maybe I will just choose USDT.

USDD isn't really that well-known, and its market capitalization is less than $1 billion. You might not be familiar with it because you probably don't follow the dramas in this market. I also don't use or interact with USDD, I only know about it because Justin Sun wanted to join the algorithmic stablecoin trend similar to Terra's UST to boost DeFi development in the Tron ecosystem.

I don't fully understand USDD's algorithm, but I'm worried that it still carries some risks similar to UST and could lead to investor losses in certain scenarios. As an investor, I don't want to take on that kind of risk. There are plenty of other stablecoin options in the crypto market that I can use with peace of mind.

What drama happened to USDD? Does that have a bad effect on the community in Crypto? And what do you mean by Terra Ust? Looks like I've never heard of their story. Please explain to me with detail informations.

[KryptoBull]

What drama happened to USDD? Does that have a bad effect on the community in Crypto? And what do you mean by Terra Ust? Looks like I've never heard of their story. Please explain to me with detail informations.

As I've presented in topic, USDD is currently no longer backed by BTC, but only by TRX - Tron's native token, and this could create a financial vulnerability as TRX can never be as reliable as BTC. That's why I'm worried about the collapse of USDD and the negative impacts on projects that consider USDD as an official asset.

UST was also very famous when its value was pegged to LUNA - Terra's native token. Then, a liquidity crisis and a wrong decision by the Terra Foundation caused both UST + LUNA and the ecosystem to disappear in the short term, pushing the crypto market into a crypto winter in the craziest way with the bankruptcy of a series of DeFi projects.

[Bobcrypto]

Currently I just heard about USDD from OP because I have never heard of it before. I only know USDT, USDC, DAI, FDUSD which are on Binance. Maybe the algorithm of USDD which tends to be risky can be avoided because I have also just heard about it. I personally don't want to hold USDD and if forced to choose maybe I will just choose USDT.

USDD isn't really that well-known, and its market capitalization is less than $1 billion. You might not be familiar with it because you probably don't follow the dramas in this market. I also don't use or interact with USDD, I only know about it because Justin Sun wanted to join the algorithmic stablecoin trend similar to Terra's UST to boost DeFi development in the Tron ecosystem.

I don't fully understand USDD's algorithm, but I'm worried that it still carries some risks similar to UST and could lead to investor losses in certain scenarios. As an investor, I don't want to take on that kind of risk. There are plenty of other stablecoin options in the crypto market that I can use with peace of mind.

What drama happened to USDD? Does that have a bad effect on the community in Crypto? And what do you mean by Terra Ust? Looks like I've never heard of their story. Please explain to me with detail informations.

The drama that had happened to USDD is just similar to what has happened to UST Algorithm stable coins found on the Terra network that had collapsed two years ago. If you have read the topic, and some of the posts here, you should have learnt that USDD is an algorithm stable coins on the Tron networks pegged to the Tron native token, TRX and Bitcoin (Btc).
The drama started on the Tron platform when the Bitcoin (Btc) that was initially pegged to the USDD stable coins was withdrawn causing a crash or depegging of the USDD stable coins.
Finally, the depegging of the USDD has not affected the crypto community because I think that USDD is not that a popular stable coin just like USDT, or USDC stable coins.

[KryptoBull]

The drama that had happened to USDD is just similar to what has happened to UST Algorithm stable coins found on the Terra network that had collapsed two years ago. If you have read the topic, and some of the posts here, you should have learnt that USDD is an algorithm stable coins on the Tron networks pegged to the Tron native token, TRX and Bitcoin (Btc).

The drama started on the Tron platform when the Bitcoin (Btc) that was initially pegged to the USDD stable coins was withdrawn causing a crash or depegging of the USDD stable coins.

Finally, the depegging of the USDD has not affected the crypto community because I think that USDD is not that a popular stable coin just like USDT, or USDC stable coins.

At least at this point, USDD's cap is no more than 1B USD and doesn't come with any obvious risks. If investor confidence gradually declines, we will see USDD slowly disappear from the market and it will no longer be a threat to the Tron ecosystem or the entire crypto market.

I believe that the elimination of USDD is part of Tron's plan to focus on pumping other trends like memecoins or DeFi in the near future to attract capital flow into the uptrend. Sun is cunning enough to know what needs to be done for the Tron ecosystem!