The stablecoin space has become a red ocean. USDT accounts for 90 billion dollars, USDC accounts for 30 billion, and DAI has over 5 billion. New projects trying to enter are either crushed by giants or struggling on the margins. However, USDD took two years to grow from zero to over 700 million dollars, and it is still steadily increasing. What secrets are hidden behind this?
Let's first break down the underlying logic of several mainstream stablecoins. USDT and USDC are purely centralized models. Their logic is very simple: I deposit 1 US dollar in a bank account, and then issue 1 stablecoin on the blockchain. What users trust is the credit of the company behind it. The advantage of this model is high efficiency and rapid scaling, but the problems are also obvious. You have to believe that Tether or Circle won't run away, believe that their audit reports are real, and believe that regulators won't suddenly freeze their accounts.
DAI follows a purely decentralized route, relying entirely on over-collateralization. Users collateralize ETH and other assets to mint DAI. The protocol ensures stability through a liquidation mechanism. This direction is conceptually purer, but the capital efficiency is too low. If you collateralize $150 of ETH, you can only borrow $100 of DAI, leaving $50 of value locked. This cost is a bit high for DeFi players pursuing efficiency.
USDe is another extreme. It uses a delta-neutral hedging strategy to earn profits through the funding rates in the futures market. This strategy is very appealing in a bull market when funding rates are high, with yields reaching 20% or even higher. But the problem is, what happens in a bear market? Funding rates become negative, resulting in no earnings and potentially losing money. Moreover, USDe is highly dependent on centralized exchanges. If a particular exchange encounters problems, the entire system will be affected.
The design of USDD is very interesting. It has taken the advantages of these three models while avoiding their respective pitfalls. First, it adopts DAI's over-collateralized CDP model, ensuring that every USDD is backed by real crypto assets. Currently, the collateralization rates for the TRX-A vault is 276.85%, TRX-B is 293.08%, and TRX-C is as high as 302.31%. This means that even if the TRX price halves, the system still has enough collateral.
However, USDD does not fully copy DAI. It has added a PSM module that allows users to exchange USDT or USDC for USDD at a 1:1 ratio with zero slippage and zero fees. This design is crucial because it effectively integrates the liquidity of centralized stablecoins into a decentralized framework. As long as USDT and USDC remain stable, the peg of USDD is guaranteed.
More aggressively, the Smart Allocator mechanism takes idle funds from the PSM reserves of USDD and invests them in audited lending protocols like Aave and JustLend. Currently, about $410 million is in operation, and with an annualized return of 3.94%, it can earn over $16 million a year. A portion of this income is distributed to sUSDD holders, part is used for buying back and burning JST, and the rest is reserved for protocol operations.
This design directly addresses the issue of capital efficiency. When you collateralize TRX to mint USDD, the $100 of USDD can be converted into sUSDD earning 12% annually, which means your collateral is working. The minted stablecoins are also working, creating a double yield effect. The capital efficiency is even higher than that of centralized stablecoins.
Moreover, USDD's sources of income are more stable, unlike USDe, which relies on funding rates. When the market shifts, the income disappears. Although lending interest rates will also fluctuate, the basic framework remains stable. As long as there are borrowers, there will be interest. The sustainability of this income is much stronger than that of funding rates.
From a risk control perspective, USDD's design is also very rigorous. First, there are layered vaults: TRX-A, TRX-B, TRX-C, USDT-A, sTRX-A. Each vault has different collateral rates and debt ceilings. This refined management allows the system to attract users seeking efficiency while ensuring overall security.
Next is the automatic liquidation mechanism. Once the collateralization rate of a vault drops into a dangerous zone, the system will immediately initiate a Dutch auction to sell off the collateral. The price starts high and goes low, and there will always be arbitrageurs willing to take over at a low price. This mechanism has performed well during several market fluctuations in 2025, with no accumulation of bad debts.
The third is PSM as the last line of defense. Even if there are problems with the collateral, users can redeem USDT or USDC through PSM at a 1:1 ratio as long as the PSM reserves are sufficient. Users' principal is safe. Currently, the PSM reserves on TRON exceed 60 million, and over 10 million on Ethereum. This money is the moat for USDD.
However, the most impressive aspect of USDD is not its technical design but its strategic positioning, which has found a gap in the market. While USDT and USDC have large volumes, they are essentially just tools that do not generate income, do not engage in DeFi, and do not care about scenarios. DAI, while decentralized, is limited to a single scenario, primarily used by DeFi players. USDe offers high returns but also comes with high risks and is heavily reliant on centralized exchanges.
USDD aims to be an all-scenario stablecoin that can earn income in DeFi, be used anytime in wallets, facilitate cross-border remittances, and participate in liquidity mining. This multifunctional positioning is indeed a gap in the stablecoin market.
From recent developments, USDD is seriously working on scenario implementation, collaborating with UXLINK for social payments, AEON Pay and Uquid for merchant payments, and HPX for the Southeast Asian market. Each scenario is progressing steadily. Although the user base is still small, the infrastructure has already been established.
This approach is completely different from other stablecoins. USDT and USDC never care what users do with them; as long as someone uses them, that's enough. DAI is also focused on DeFi without considering other scenarios. USDD is one of the few stablecoins that is seriously expanding its scenarios.
Moreover, USDD's multi-chain deployment is also very systematic. It does not simply bridge tokens to various chains but does native deployments on TRON and Ethereum. Each chain has its own independent CDP system and PSM module. The benefit of this approach is higher security, as it does not rely on cross-chain bridges, and the liquidity of each chain is independent, preventing the situation where one chain runs out of liquidity.
Recently, the cooperation with the new public chain Stable is also a continuation of this strategy. Stable is specifically optimizing for stablecoins. If it really takes off, USDD, as one of the first ecosystem partners, will gain resources and status that later entrants cannot match. This forward-looking layout shows that the USDD team is not just looking at the present but is positioning itself for the future.
From a governance perspective, USDD also performs relatively well. Although it is initiated by the TRON DAO Reserve, major decisions need to be voted on by the JST DAO, and the voting rate is quite good, with significant proposals generally reaching over 50%. This number is considered quite high in DAO governance, where many projects have voting rates that remain in single digits for years.
More importantly, USDD's financial data is completely transparent. The Treasury Dashboard displays real-time protocol income and expenditures, as well as JST buybacks and burns. This level of transparency is unique among stablecoins. USDT's audit reports come out every six months and are often redacted. Although USDC is compliant, many key data points are not made public. USDD directly lays out its books, allowing for checks at any time.
This level of transparency is not just for show; it is a strategic choice. After the collective collapse of algorithmic stablecoins, the market's greatest demand for stablecoins is trust. Instead of hiding things, it is better to be completely open and let the data speak for itself. This strategy is indeed effective. After the launch of the Treasury Dashboard, USDD's TVL growth has significantly accelerated.
Of course, USDD is not without its shortcomings. The biggest issue is that its scale is still not large enough. With a $700 million volume, it can only be considered medium-sized among stablecoins, a significant gap compared to USDT's $90 billion. Secondly, brand awareness still needs to be improved, as many newcomers are unaware of USDD's existence. Thirdly, there is a concentration issue with the collateral. Currently, it is primarily based on TRX, and if TRX encounters problems, it could theoretically put pressure on the system.
However, these shortcomings can all be improved. Scale can gradually accumulate, brand awareness can be enhanced through marketing, and collateral can be diversified. More importantly, USDD's core competitiveness is clear: it has found a balance between centralization and decentralization, ensuring the security of over-collateralization while maintaining the liquidity of PSM. It can generate income and create scenarios. This hybrid model is unique among stablecoins.
Looking ahead, if USDD can continue to make strides in multi-chain deployment, achieve breakthroughs in payment scenarios, and stay ahead in regulatory compliance, it has the potential to grow from a small, beautiful vertical protocol into an important player in the stablecoin space. The foundation for all this is that it has found a path that is different from USDT, USDC, DAI, and USDe—a path that is more balanced, more sustainable, and more in line with the spirit of Web3.
