Whether USDD (a decentralized stablecoin on the TRON network) offering a 20% interest rate is at risk of collapsing like UST depends on many factors, but there are distinct and similar points that need to be clearly analyzed:
1. Differences between USDD and UST
- Value assurance mechanism:
- UST (Terra): Is an algorithmic stablecoin, maintaining a 1:1 peg with USD through the burn/mint mechanism of LUNA, without any collateral assets. When UST loses its peg, the system relies on arbitrage to stabilize the price, but this mechanism fails in a market panic.
- USDD: Advertised as over-collateralized, with reserves comprising various assets such as TRX, BTC, USDT, USDC. The collateral ratio is often published above 130%, aimed at ensuring stability even when the market fluctuates.
- Source of the 20% interest rate:
- UST: High interest from Anchor Protocol was artificially subsidized (unsustainable), relying on new investment capital to pay interest to old users — a Ponzi-like model.
- USDD: The 20% interest rate often comes from DeFi platforms on TRON (e.g., JustLend), generated from lending, staking, or liquidity mining. However, sustainability depends on actual market demand and profits from these activities.
2. Potential risks of USDD
- Quality of collateral assets:
- Although USDD is collateralized by various types of assets, if their values (such as TRX, BTC) drop sharply, the collateral ratio may suddenly plummet, leading to loss of confidence and a "bank run."
- UST collapsed because LUNA (the supporting asset) lost value nearly to zero. USDD is more diversified, but still depends on crypto volatility.
- Transparency:
- USDD is managed by the TRON DAO Reserve Group, but independent audits and public reserves are not as clear as DAI (MakerDAO). If the reserves are insufficient or illiquid, the risk of losing the peg will be high.
- The 20% interest rate is not sustainable:
- High interest rates are often tools to attract short-term capital. If revenue from DeFi (transaction fees, lending) is insufficient to cover it, interest rates will decrease or more tokens will need to be printed (causing inflation).
3. Lessons from UST
- Market sentiment: Although the technical mechanisms differ, a FUD (Fear, Uncertainty, Doubt) event could trigger a "bank run." UST collapsed largely due to loss of confidence, leading to a sell-off spiral.
- Systemic risk: USDD is tied to the TRON ecosystem. If TRON encounters issues (smart contract failures, hacks, scandals), USDD will be affected.
4. Conclusion
USDD may not collapse like UST if:
- The collateral reserves are strong enough, diversified, and audited regularly.
- The 20% interest rate is maintained from actual revenue (not subsidized).
- The community maintains trust in the system.
However, the risks remain very high due to:
- The inherently volatile nature of crypto.
- The history of borrowing high interest rate models from Terra.
- Competitive pressure from centralized stablecoins (USDT, USDC).
Advice: Users should be cautious, only invest money they can afford to lose, and closely monitor the transparency of USDD's reserves.
