Something I've been thinking about since the collapse of LUNA & UST is....
USDD & TRX
If you haven't heard, the infamous Justin Sun has entered the stablecoin space with his very own algorithmic stablecoin - USDD. Why did he decide it was necessary to create his own algorithmic stablecoin? Well, ole Justin has some kind of weird obsession with ruining things, so why not step in a n try to ruin stablecoins? Clearly the goal here is to make a shit ton of money.
He's taking pointers from his friend Do Kwon that saw the collapse of his stablecoin but still remained rich. He saw just how much money Terra and the LFG were making and just couldn't keep his grimy little fingers out of the mix. He one-upped Do though by launching staking APR for the newly-created stablecoin over 30% APR.
There's nothing wrong with offering a high APR to attract users or whatever. What's not okay is the fact that USDD is literally a copy-paste of UST. It works the exact same way, and you can check the whitepaper for yourself.
Obviously Justin didn't know UST was going to implode, so he copied it prematurely. The question is now... How long will it take for USDD to implode in the same fashion?
Like I said, the mechanism for keeping the "peg" of USDD is exactly the same as the mechanism was for UST. They are counting on arbitrage traders to keep the price where it's supposed to be. At any point in time, 1 USDD can be swapped for $1 worth of TRX, and it works the same the other way around. There's supposedly a large reserve of assets in the TRON DAO that can be used in the case of a mass depegging event like there was with UST.
Starting to sound really familiar? Well, that's because it is literally the same thing. We've already seen that this model doesn't work, and is going to eventually cannibalize itself if enough money gets pumped in. The whitepaper states that there will be over $10 billion in the TRON DAO Reserve that is going to be used to "collateralize" USDD.
Again - we've already seen that this model doesn't work. It doesn't matter how many dollars worth of assets you have in reserves, unless it were to be actual dollars. It doesn't clearly state which assets are going to be used to back USDD in the reserves, so I would bet that a large percentage of it will be TRX (which is fucking worthless).
Nowhere in the whitepaper does it mention any kind of total supply aside from stating that 1 trillion USDD is going to be minted. So they put $10 billion worth of assets in a contract, and mint $1 trillion worth of assets? Sounds a little SUS to me, but I'm no millionaire, so what do I know?
It looks like the actual minting of USDD with TRX, and vice versa won't actually be available until November though. Plenty of time for some whales to plan an attack to take the whole thing down, surely. Hopefully enough people have learned from the collapse of UST that they won't dump their life savings into this thing. I know better though, people are going to do the exact same time.
Then when it all comes crashing down and Justin is sleeping on his giant pile of free money, people will be making death threats. The 2 projects are just too similar for it to work. It's time we start recognizing the red flags before it's too late. If we want to have algorithmic stablecoins that actually work, they should take some notes from HBD. It's not perfect, but there's a lot less risk of a total implosion.
I cannot wait to watch Justin's house of cards collapse. He's been making insane amounts of money and profiting of dumb investors for a long time. He took over the Steem blockchain in a very hostile way, which turned out to be a blessing in disguise... Still he burned a lot of people and caused a lot of chaos. He took over BitTorrent and destroyed it. It's time for him to get what's coming to him.
I'll be waiting for the day USDD collapses so I can say I told you so. Don't be sheep. Don't give this asshole your money.