Invested by YZi Labs, detailed explanation of new gameplay for USD.AI stablecoin.
On August 26, YZi Labs announced a strategic investment in USD.AI, a stablecoin protocol providing hardware collateral financing for AI infrastructure.
According to Coingecko data, the current global market cap of stablecoins has exceeded $285 billion. Giants like Circle and Kraken are also entering the stablecoin payment chain race.
However, the vast majority of current stablecoin projects are still primarily anchored to traditional models such as the US dollar and US Treasury bonds, showing a general lack of innovation and overall 'imagination'. Against this backdrop, a distinct challenger is entering the market with a brand new approach.
Recently, a unique stablecoin project USD.AI that integrates DePIN, RWA, and AI has sparked enthusiastic market discussions. It does not simply peg to the US dollar, but generates income through AI hardware collateral, filling the financing gap for computing resources.
Recently, USD.AI officially launched and opened the deposit channel, rapidly gaining popularity. This may bring new opportunities for the integration of AI and stablecoins.
Project Background
According to Rootdata, the project was established in 2024. David Choi, one of the core founders of USD.AI, is the co-founder and CEO of the well-known NFT lending platform MetaStreet and was previously an investment banking analyst at Deutsche Bank.
What truly brings USD.AI into the spotlight is its impressive funding background.
On the 14th of this month, USD.AI announced the completion of a $13.4 million Series A funding round led by Framework Ventures.
As an investment institution focused on DeFi and infrastructure, Framework Ventures has previously supported star projects such as Uniswap and ChainLink. Its participation in leading USD.AI also reflects institutional recognition of the project's innovative value. Other investors are equally strong, including the well-known cryptocurrency venture capital Dragonfly, Layer2 network giant Arbitrum, and the popular exchange Bullish that has just completed its IPO.
The luxurious lineup of this funding round not only injects strong resources into USD.AI but also verifies the appeal of DePIN combined with AI stablecoin projects to top-tier capital, significantly raising market expectations. After the funding information was released, the USD.AI project team capitalized on the momentum and officially launched on the 19th, sparking widespread discussion in the market.
Operating Principles and Core Mechanisms
In the context of growing demand for AI computing power, the design of USD.AI is to combine stablecoin protocols with financing for AI infrastructure to address issues that other projects in the current market have not tackled.
Small and medium-sized AI companies possess valuable GPU hardware but struggle to obtain operating funds through traditional channels.
The core goal of the project is to support hardware procurement and operations for AI companies through on-chain capital, filling the financing gap of traditional finance in the new AI economy, while maintaining the low-risk characteristics of stablecoins.
USD.AI revolves around a closed-loop system of 'collateral - minting - investing - earning', combining the currently popular concepts of RWA and AI, showcasing its unique innovative advantages in this wave of stablecoins.
The operating principle of USD.AI begins with users using stablecoins such as USDT or USDC as collateral to mint USDai stablecoins at a 1:1 ratio. USDai is backed by US Treasury bonds and mainstream stablecoins to achieve a pegged US dollar price and has instant redemption capability and certain liquidity, making it suitable for trading or providing liquidity in the DeFi ecosystem. Users can further choose to stake USDai to obtain sUSDai tokens and participate in other DeFi projects for additional returns, achieving a 'one fish multiple eats' effect.
USD.AI will use user-deposited funds for two types of asset investment: first, providing loans to AI companies for the procurement of GPUs and other hardware, generating high interest, with the current official website showing an annualized return of 6.96%; second, if funds are idle, they will be used to invest in US Treasury bonds for stable base income. sUSDai holders can amplify their returns through DeFi protocols, with the target annualized return given by the project’s official website reaching 15%-25%, while USDai holders enjoy low-risk stable returns.
The core mechanism of USD.AI includes the following key components to ensure its innovation and stability:
Dual token system: USDai serves as a low-risk stablecoin suitable for users seeking stability; sUSDai is aimed at investors seeking high returns, combining flexibility and risk exposure. This design meets the different risk preferences of users while maintaining compatibility with the DeFi ecosystem.
Asset tokenization and the Caliber framework: Through the CALIBER framework, USD.AI tokenizes physical assets such as AI hardware into on-chain assets, ensuring asset ownership transparency and legal enforceability through legal and technical means. The on-chain insurance mechanism further reduces default risk.
QEV redemption mechanism: To address the long-term and low liquidity of AI infrastructure assets, USD.AI has designed a QEV mechanism that manages sUSDai redemption requests in a market-driven manner to avoid inefficiencies of first-come, first-served, while ensuring fairness and stability of the protocol.
FiLo Curator expansion mechanism: This mechanism allows the protocol to significantly introduce new borrowers, expand the AI infrastructure investment portfolio, while protecting user interests through structural protection and risk alignment mechanisms, ensuring diversity and sustainability of income sources.
In summary, the funds deposited by users into USD.AI will be used to lend to AI companies needing computing power through GPU and other hardware to earn interest, all processes are transparent and traceable, and any idle funds will be used to purchase US Treasury bonds for guaranteed returns.
USD.AI's innovative mechanism gives it a unique competitive advantage. Compared to traditional stablecoin projects, USD.AI achieves higher returns through investments in AI infrastructure; compared to high-risk DeFi protocols, its risk isolation and insurance mechanisms significantly reduce systemic risk.
USD.AI not only injects new vitality into the stablecoin market but also provides a scalable solution for the capital needs of the AI economy, potentially becoming a pioneering project in the integration of stablecoins and AI infrastructure.
Participation Method
Currently, the USD.AI project has opened user deposits and invited other users to obtain USD.AI reward system Allo points.
Users can obtain final token rewards through two methods: ICO and airdrop. All participants will enter with a project valuation of $30 million in circulation (corresponding to 10% of a total FDV of $300 million).
According to official tweets, minting or staking USDai will continuously generate points daily, allowing users to choose different strategies to determine their final ICO allocation or airdrop rewards.
The Allo points activity will end when the YPO (cumulative paid returns) reaches $20 million. Users choosing ICO allocations need to go through KYC, while users opting for airdrops do not need to go through KYC.
More advanced ways to earn Allo points can be understood through the introduction video in the official tweet.
In simple terms, if you want to participate in the ICO of the project, you can hold USDai; if you want to participate in the airdrop, you need to stake USDai to obtain sUSDai.
Currently, purchasing USDai or sUSDai will grant qUSDai, which is a deposit queue proof that will be automatically converted to the corresponding token within 24 hours.
USD.AI currently has a total deposit limit of $100 million, and since all purchased funds are in qUSDai status, the current TVL only shows the $52 million deposited during the internal testing period.
Market Discussion
The current market view on the USD.AI project is polarized.
Supporting users generally believe that USD.AI is a uniquely innovative stablecoin project that combines the currently popular AI concept, allowing users to enjoy AI dividends while ensuring stable returns. It provides various participation strategies so that different types of users can find suitable solutions, combining the 'stability' characteristics of stablecoins with high-risk, high-return options.
However, users with opposing views believe that the information revealed by USD.AI indicates that its team background may be predominantly Chinese, and that the project simply piles up popular concepts without substantial innovation.
Interestingly, USD.AI core founder David recently replied under this FUD tweet, identifying himself as a Korean-American, while stating that the project headquarters is located in New York, but he is very happy to answer questions from Chinese users.
The author believes that USD.AI indeed provides a different answer in the popular stablecoin track, but whether it can gain market favor and recognition still depends on whether people are willing to 'vote with their feet' to quickly reach the $100 million TVL limit.
Its success or failure will also serve as a litmus test for the market's acceptance of the emerging narrative of 'AI infrastructure + stablecoins'.
This article is a collaborative reprint from: Deep Tide
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