Yesterday, Binance Wallet launched a pig trotter rice event: pledge USDD to receive an annualized return of 14.3%.
I noticed that some friends did not fully explain this event when promoting it. This article will give everyone a detailed introduction on whether it is worth participating.
Streamlined version:
If you do not have the USDT chain of $ETH , it is not recommended to participate;
If you do not plan to deposit more than 500u, it is not recommended to participate, otherwise the returns may not even cover the gas fees;
USDD has a 99.99% probability of not crashing, but if you are still worried about the previous issue with mevUSDT withdrawals and swear off any Defi, it is also not recommended to participate.
Next, I will explain in detail:
First, what kind of activity is this?
This is an activity where you deposit money, and the project team gives interest: you buy USDD with USDT, then mortgage the USDD to the platform (after mortgaging it will turn into sUSDD), and you can earn interest. As shown in the picture, the interest is an annualized 14.31%.
Second, why if you do not have USDT on the ETH chain, I do not recommend participation?
Because even though 14.31% annualized is very high, this activity can only deposit for 28 days, which means the yield is 1.1%.
If you do not have USDT on the ETH chain, cross-chain exchanges will incur about 0.7% in losses. If you later need to exchange to a commonly used chain, the back-and-forth will incur a 1.4% loss, which is higher than the gains.
Third, why if you don't plan to deposit over 500u, I do not recommend participation?
As we just mentioned, the yield for a 28-day deposit is 1.1%. If you deposit 500u, the interest is 5.5u.
However, because the operation is on the ETH chain, which is known as an expensive chain, the gas fees are generally above 1u. When you participate in this activity, you need to perform 4 on-chain operations, which will incur a loss of 5u. This means you won't make any profit.
If you deposit below 500u, you still have to pay gas fees, which is meaningless.
Fourth, is this project safe?
To say the answer first, it's 99.99% safe.
If you deposit over 500u, and there is USDT on the ETH chain, it is worth participating. After all, this yield is real and significantly higher than normal investments. Especially since even after the event ends, I see the base yield is still 12%.
If you participate in this activity, I will introduce some background stories (trust me, this story is not meant to scare anyone off; it's just that 0.001% probability, think of it as watching a show):
There are generally two models for issuing stablecoins:
One type is stablecoins like USDT and USDC, which have fiat currency reserves. Users can directly exchange USDT for cash at any time, which is the underlying logic of USDT being pegged 1:1 to the US dollar.
Another type is USDD, an algorithmic stablecoin backed by digital assets. The project team will hold enough digital currency assets to ensure that everyone can redeem them for USDT at any time.
USDD is an algorithmic stablecoin created by Sun in 2022. Sun has reserved a large amount of $TRX , USDT, and other digital currency assets to ensure that users can exchange USDD for other digital currencies at the price of 1 dollar at any time.
The criteria for determining whether an algorithmic stablecoin can participate are two:
First, what digital assets it reserves: If the reserves are altcoins, then they are basically worthless; if the reserves are mainstream coins like USDT, BTC, etc., then it is still acceptable.
Second, how high is its reserve ratio: Cryptocurrencies are high-risk assets. For instance, on the 1011 day, even BTC dropped by 20%. Therefore, the reserved digital assets must not be 1:1. At least a reserve of over 200% is needed to avoid losses.
From these two standards, USDD should not encounter problems because the assets it reserves are primarily USDT, and the reserve ratio is over 230%, so there is no fear of a black swan event. For example, on the day of the 1011 black swan, USDD remained stable at 1 dollar.
Since its issuance in 2022, even coinciding with the collapse of algorithmic stablecoin LUNA, when people were least trusting of algorithmic stablecoins, the lowest price of USDD was 0.93, and it quickly recovered. That's why I say it's 99.99% safe.
That's all. If you find it useful, please give a like.
Friends who cannot find the event entry can click 'Wallet' at the top of the APP homepage — then click 'Discover' at the bottom right of the page — clicking the banner will take you there.
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