What is Smart Allocator? USDD starts earning on its own

Today, I habitually opened the USDD official website and saw an update. The homepage has a new navigation bar called: Smart Allocator, which means intelligent allocation. I was puzzled, what is this? Later, after a closer look, I found that Smart Allocator is a significant change in the USDD economic model.

What is Smart Allocator?

To put it simply, it is USDD's own income strategy, which invests a portion of the funds in the protocol into some stable DeFi or lending protocols to generate income. This portion of the income is returned to the users, making the economic model healthier and more sustainable.

What are the advantages of Smart Allocator?

1/ Healthier economics: In the past, USDD's staking rewards were subsidized by TRON DAO, initially adjusted linearly from 20% based on the issuance amount to the current 6%. When the smart allocation of USDD is launched, it will directly reduce dependence on TRON DAO subsidies, forming a healthier and more sustainable token economics.

2/ Safer guaranteed mechanism: Most DeFi protocols or stablecoins in the market cannot bear risks without a guaranteed mechanism, but USDD is different. Due to its unique PSM mechanism, users can exit at a 1:1 ratio at any time, and Smart Allocator promises that users' principal will not be affected in extreme situations.

Where is Smart Allocator currently operating?

According to data from the USDD official website, a total of 350.05M USDT has been allocated in this sector, with 300M allocated to AAVE and 50M to JustLend. Meanwhile, USDD promises that this allocation will always be conservative, prioritizing high liquidity, market-validated, and stable protocols, and will adjust strategies at any time.

What distinguishes Smart Allocator from other stablecoin strategies?

In fact, stablecoins will ultimately move towards self-sustainability; it is unrealistic and unhealthy to rely on any subsidies for profit indefinitely. I saw in the official documents a horizontal comparison of the profit strategies of three stablecoins.

First, in terms of funding sources, both USDD and MakerDAO come from protocol reserves and are both risk-borne by the protocol or DAO, so users' principal will not suffer any losses, which is better than the strategies of Frax and some CEXs. However, USDD's protocol rewards are higher than those of MakerDAO.

Secondly, in terms of strategy, USDD has completely disclosed the fund allocation of the protocol reserves on-chain and has published it on the official website. Compared to MakerDAO's partial on-chain and Frax's risk strategies, as well as some on-chain and CEX's completely off-chain strategies, it is more transparent, secure, and regulatory-compliant.

In simple terms, this is a change in token economics. By investing reserve funds into low-risk, high-liquidity DeFi protocols, it provides USDD users with a sustainable income mechanism instead of a self-subsidy approach. This also indirectly confirms the robustness and safety of USDD, as well as the upgrading and adjustment of market strategies.

@justinsuntron @usddio #TRONEcoStar