The Silicon Valley Bank collapse has many speculators seeking alternatives to bank-based stablecoins, such as USD Coin (USDC).
Many investors dumped USD Coin because they kept $3.3 billion of its cash assets in Silicon Valley Bank. Silicon Valley Bank collapsed on 10 March 2023, leading to a federal bailout on 12 March 2023. Investors became afraid because USD Coin makes payment in US dollars held in bank accounts. If there is no money in those accounts, USD Coin loses its value.
Predictably, many speculators are examining alternatives, such as decentralized stablecoins such as USDD (USDD). Instead of bank accounts, USDD makes payments from pools of cryptocurrency, stablecoins, and other digital assets. They claim the amount of USDD’s collateralized assets is 164.99% larger than the amount of USDD in circulation on 13 March 2023.
How does USDD (USDD) work?
Like USD Coin (USDC), USDD (USDD), is a cryptocurrency that contains a smart contract. USDD’s smart contract makes payment in US dollars when you spend a USDD.
Smart contracts are code written into a blockchain that executes an agreement. For example, USDD’s smart contract makes payment in US dollars when you spend a USDD. They claim the Slowmist Security Team audited USDD’s TRC20 token standard and ERC20 token standard smart contracts for safety and effectiveness.
They hold USDD’s digital assets in the Tron DAO Reserve. The Reserve holds USDD and other stablecoins on the Tron blockchain to maintain price stability.
Tron DAO Reserve
The Tron DAO Reserve had a $44.074 billion Market Cap of Tron-Based (TRC20) stablecoins on 15 March 2023. Tron DAO’s assets included 41.125 billion Tether (USDT), 725.332 million USDD (USDD), 499.563 million USD Coin (USDC), 1.301 billion True USD (TUSD), and 273.149 billion Just (USDJ).
Thus, the Tron DAO is a basket of stablecoins that acts as a liquidity pool. A liquidity pool is a collection of assets that provide liquidity. The Tron DAO provides liquidity for stablecoins, such as USDD (USDD).
They hope the Tron DAO can stabilize stablecoin exchange rates by providing liquidity. Interestingly, the call the Tron DAO a lender of last resort that can stabilize collapsing stablecoins.
The Tron DAO supports USDD’s Peg Stability Module (PSM). The PSM is a swap tool that supports USDD’s stability. Theoretically, USDD will always be able to make payments in USD because the Tron DAO can always provide US dollars to cover USDD payments.
The hope is that the Tron DAO and Peg Stability Module will always keep USDD’s price close to $1.
What Value can USDD (USDD) offer?
Mr. Market is taking notice of the USDD. CoinMarketCap named USDD (USDD) the 12th most trending cryptocurrency on 13 March 2023. However, USDD was CoinMarketCap’s 65th ranked cryptocurrency with a 99.13₵ Coin Price on 15 March 2023.
CoinMarketCap gave USDD a $719.188 million Market Cap, a $718.860 million Fully Diluted Market Cap, a $13.387 24-Hour Market Volume, a $9.064 million Centralized Exchange (CEX) Volume, and a $4.591 million Decentralized Exchange (DEX) Volume on 13 March 2023. They base numbers on a 725.332 million USDD Circulating Supply.
In contrast, CoinGecko ranked USDD 64th and gave it a 99.68₵ Coin Price on 13 March 2023. CoinGecko gave USDD a $724.175 million Market Cap and a $27.129 million 24-Hour Market Volume on 15 March 2023. They base numbers on a 725.332 million USDD Circulating Supply.
Is USDD Stable?
USD Coin’s problems are affecting USDD. Its price fell from $1 on 10 March 2023 to 93.36₵ on 11 March 2023, CoinGecko estimates. The Coin price rose to 99.68₵ on 15 March 2023.
I think the Coin Price shows USDD’s unique model can provide some stability. However, we do not know if USDD (USDD) can survive extreme economic turbulence. Yet USDD seems a little more stable than bank-based coins such as USD Coin (USDC) and Tether (USDT).
One problem I see with bank-based stablecoins is that they are only as stable as the banks where they hold their fiat currency. The Silicon Valley Bank debacle shows bank instability makes stablecoins unstable.
All Stablecoins are Potentially Unstable
A potential danger I see with USDD is the reliance on stablecoins such as Tether and USDC. If bank instability hurts those coins, it could make USDD and the Tron DAO unstable.
The sorry truth is that all stablecoins are potentially unstable. However, some stablecoins could be a smart investment because of the strength of the US Dollar. In particular, USDD could generate extra revenue from liquidity from Tron DAO.
I advise speculators seeking an alternative to Tether (USDT), BinanceUSD (BUSD), and USD Coin (USDC) to investigate USDD. This decentralized stablecoin could have a mechanism for alleviating stablecoin instability.
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