If we talk about what has been the most tumultuous in Web3 over the past two years, stablecoins definitely count. We shout 'long live decentralization,' but when it comes to exchanging real money for digital currency, we still can't help but feel anxious: is there really anything behind this thing?
This is what we talked about today, the 'trust paradox'—we want to break free from the control of banks and governments, but in the end, we find that a 'trustless' system entirely supported by code and algorithms actually requires us to believe that it won't collapse.
1. Where has trust gone? The awkwardness of decentralized stablecoins
The ideal of decentralized stablecoins is beautiful: establishing a set of algorithms that automatically adjusts supply and demand, keeping the price permanently pegged to $1. No need to look at the banks' faces, no fear of government freezes, so much freedom.
But what about reality? The collapse of UST happened not long ago. At that time, many thought algorithms were 'eternally divine', but when the market panicked, the algorithm directly malfunctioned, and hundreds of billions in market value vanished. This event hit everyone hard: it turned out that relying solely on mathematical formulas could not withstand the panic of human nature.
This exposes a painful truth: decentralization does not automatically win trust. We have escaped reliance on centralized institutions but have to shift our trust elsewhere — such as to those lines of code that may have bugs, or to that smart contract that could be hacked. This is not 'de-trusting'; it's simply 'trusting in another place', and the cost of trust has increased.
So the question arises: Is there a way to maintain the essence of decentralization while providing users with real security?
2. The solution of USDD: solidify 'collateral' and broaden the pathways.
The changes in USDD over the past two years are quite interesting. It initially followed an algorithmic path, but after the UST collapse, it clearly learned its lesson and quickly shifted to a more stable route: over-collateralization + flexible exchanges. By 2025, we can refer to it as USDD 2.0 — a more pragmatic stablecoin that emphasizes having real backing.
1. The core is simply this: more collateral means more security.
Now, issuing USDD is not done out of thin air, but relies on solid collateral. For example, if you want to get some USDD, you have to stake in assets like TRX or USDT that are worth more, and usually, the value you stake needs to be significantly higher than the USDD you want to borrow (for instance, you might need to stake $150 to borrow $100). This way, even if the price of the collateral drops, there is some buffer space, making it less likely to face liquidation. According to their own disclosed data for the end of 2025, the collateralization ratio is often maintained above 200%, sometimes close to 300%. This is like when you apply for a mortgage; the bank insists you pledge two houses to get a loan for one house — although it's a bit exaggerated, it is indeed stable.
2. Can't stabilize the price? Just swap!
USDD 2.0 has introduced something called the Price Stability Module (PSM), which is essentially an 'official exchange window': USDD and USDT can be swapped 1:1 without any fees, and there’s no fear of price differences. This strategy is quite clever — if USDD drops to $0.99 in the market, there will immediately be buyers who will buy in and then rush to the PSM to exchange it for $1 USDT, making a profit of one cent. As more people do this, the price of USDD will naturally climb back up. It essentially uses the power of arbitrageurs to automatically bring the price back on track.
3. It's not just about the mechanism; there has to be real backing.
Behind USDD, there is an organization called TRON DAO Reserve managing the reserves, which include assets like BTC, USDC, and TRX, functioning like a small central bank. Moreover, they regularly disclose reserve conditions, making things more transparent by 2025. Although some may still question, 'How do you manage this money?', at least having the data presented is better than relying solely on slogans.
Three, how is USDD doing in 2025?
By the end of 2025, USDD's market cap is about $7.27 billion, ranking it around 70th globally. Compared to the two giants USDT and USDC (which account for over 80% of the market), it is still a younger brother, but in the decentralized stablecoin space, it has already established a foothold.
Its path is very clear:
The main stage is in the TRON ecosystem: on the TRON chain, many DeFi and transfer scenarios use it, making it a form of 'hard currency' on the chain.
Expanding outward: by 2025, it won't just stay on TRON but will also reach places like Ethereum and BNB Chain, increasing its user base and diversifying risks.
Find ways to 'generate money': by mid-2025, it launched a yield strategy, putting part of its reserves into lending protocols like Aave to earn returns, attempting to offer holders a bit more appeal.
Fourth, there are still many challenges: trust is a marathon.
Although USDD has adjusted its model, it doesn't mean it can rest easy.
Will the collateral plummet? A significant portion of it is TRX and similar cryptocurrencies, which are inherently volatile. In the event of a major bear market, if the value of the collateral shrinks too much, the liquidation pressure will still be quite high.
The regulatory knife has already fallen: by 2025, regulations in Europe and the United States have clearly tightened, with the introduction of the GENIUS Act in the U.S. and the effective MiCA regulations in the EU. The core idea is simple: stablecoins must have 1:1 real reserves and are not friendly to purely algorithmic models. Although USDD has more collateral and aligns with the direction of 'sufficient reserves', how regulation defines 'decentralization' and who should be responsible remains a gray area.
The old issue of transparency and governance: while the reserve data has been disclosed, is the specific investment strategy and major decisions of the DAO truly decentralized and transparent? How much voice can the community have? This remains a reason for many to hold back.
Five, where to go in the future? Some practical suggestions.
USDD 2.0 provides the answer of 'mixed trust': not entirely relying on algorithms, nor reverting to pure centralization, but instead using over-collateralization to boost confidence, striving for trust through transparent reserves, and maintaining flexibility through algorithms and community governance. It attempts to find a balance between 'the freedom of decentralization' and 'the solidity of centralization'.
For us ordinary users, when looking at stablecoins, we can focus on these points:
Don't believe in 'absolute no risk': all stablecoins have underlying risks. Focus on what it is collateralized with (is it U.S. Treasury bonds or highly volatile crypto?), what the collateralization ratio is, and whether the liquidation mechanism is reasonable.
Where it's used is more important than what is claimed: if a stablecoin can only be transferred on one chain, its use is limited. A stablecoin like USDD that expands across chains and delves into DeFi scenarios is more practical.
Embracing regulation is not a bad thing: while compliance is troublesome, in the long run, it can weed out those purely profit-driven paths. How project teams can maintain decentralization while being compliant is key for the future.
Conclusion
The evolution of USDD represents a microcosm of the growth of decentralized stablecoins: from the idealistic algorithmic dream to the pragmatic and stable collateral route. What it showcases in 2025 is a more grounded attempt — instead of merely talking about 'de-trusting', it's better to gradually earn back trust using transparent data and solid reserves.
This journey is long, and trust is not built in a day. But at least the industry is starting to understand: true decentralized stability cannot rely solely on code; there must also be visible and tangible value support. As for whether USDD can ultimately become that trustworthy 'digital anchor', we will see as we progress.
A colloquial addition:
In short, what everyone wants now is not that 'utopian' decentralization, but rather 'don't mess things up, I can understand, then I can trust you'. Over the past two years, USDD has been working hard to showcase its reserves, increase collateral ratios, and support multi-chain use, all aimed at solving the problem of 'not understanding and not daring to trust'. After 2025, stablecoins that can survive and thrive will likely be those that have 'transparency' and 'pragmatism' etched in their minds.
@USDD - Decentralized USD #USDD以稳见信
