In the crypto space, what is most lacking are empty promises. The white paper is written in an extravagant manner, discussing token economics and deflationary models, but the project team secretly dumps the tokens, and retail investors clearly understand their roles as bag holders. However, something quite interesting happened on October 21st: JustLend DAO directly spent $17.73 million to buy back JST from the market and then burned 559 million tokens in front of everyone, accounting for 5.66% of the total supply. This operation is not just talk; all transaction records are on-chain and can be checked at any time.
If this were to happen in another project, it might just be a marketing gimmick. But for JustLend, the money used for the buyback and token burn did not come from fundraising or foundation reserves, but rather from the actual income generated by the protocol. What does this mean? It means that the JustLend lending protocol has made money in the past few quarters, and that money did not go into the team's pockets but was used to reward JST holders. This kind of sincerity is truly rare in the DeFi space.
Let's do a detailed calculation. JustLend generated a net profit of $59 million from Q1 to Q3. According to the proposal passed by the DAO earlier, when the net income exceeds $10 million, the buyback and burn mechanism will be activated. This threshold has long been surpassed, so 30%, which amounts to $17.73 million, will be used to buy JST. The remaining $41.36 million is also not hidden, as it has been directly written into the plan to allocate 17.5% of incremental revenue for buybacks from Q4 2025 to the end of 2026. At this rate, JST's supply will decrease by over 20% by the end of 2026.
This level of token burn is considered top-tier among governance tokens. Many projects claim to be deflationary, but in reality, their annual issuance exceeds their burn. JST genuinely reduces circulation, and it's not a one-time event but a continuous process. This is particularly interesting because it directly ties the protocol's profitability to the value of the token. The more JustLend earns, the more JST is bought back, and the less the supply becomes. This logical chain is very clear.
However, having JustLend alone is not enough. USDD is also contributing ammunition to JST. Although USDD only earned $4.72 million from Q1 to Q3 and hasn't yet reached the $10 million trigger line, based on the current growth rate, it will soon meet the threshold. At that point, USDD's income will also join the buyback army, essentially providing two cash cows: one from the lending market with JustLend and another from the stablecoin market with USDD.
Speaking of USDD's income sources, there are quite a few ways to look at it. There are mainly two parts. The first part is the stability fee from the CDP vault. Users need to pay a fee when they collateralize TRX to mint USDD. Although it has now dropped to an extremely low level of 0.5%-1%, the volume is significant. The second part is the revenue from the Smart Allocator, which is even more impressive. USDD has put $410 million of reserves into Aave and JustLend to earn interest. Based on an annualized rate of 3.94%, it can earn over $16 million a year. After deducting the 12% shared with sUSDD holders, the remaining amount is the net income of the protocol.
The advantage of this income structure is stability. Unlike some DeFi protocols that rely on trading fees, where income can plummet when the market cools down, USDD's Smart Allocator earns passively. As long as the reserves are present and the lending protocols operate normally, this cash flow is continuous. Moreover, as the supply of USDD increases, the scale of the reserves also expands, leading to a natural increase in income.
Recently, JustLend has made a big move by launching the USDD Yield Boost Campaign on December 9th, directly raising the annual interest on USDD deposits to 10%. This yield is quite competitive among stablecoin deposits since traditional bank USD deposits might only yield 4-5%, and the deposit yield for USDT on Aave is only around 3%. JustLend offering 10% shows strong confidence in its profitability.
This activity also features a clever design of phased airdrop rewards, starting the first round on December 15th and distributing rewards weekly for several weeks. This sustained incentive can help users develop a habit of treating USDD as a long-term asset rather than just cashing out after a quick profit. From the protocol's perspective, the USDD deposited can earn more returns through the Smart Allocator, creating a positive cycle.
Uniswap is also collaborating with USDD, launching two liquidity mining pools on December 1st: USDD-USDT and sUSDD-USDT, with total rewards exceeding $75,000. Although the amount may not seem particularly large, its significance is different. This marks USDD's stronghold in the Ethereum ecosystem. Uniswap is the largest DEX on Ethereum, and establishing a firm presence here is crucial for USDD to expand its market in Ethereum.
Moreover, the design of this mining pool is also noteworthy. It does not simply pair USDD-ETH, which is highly volatile, but instead pairs USDD-USDT and sUSDD-USDT, both of which are stablecoin pairs. This means LP providers face minimal impermanent loss risk. The only variables are trading fees and mining rewards. This low-risk, high-return combination is particularly suitable for conservative investors.
From the data perspective, the effects of these activities are indeed good. JustLend's USDD deposit volume has significantly increased since the launch of the initiative, and the liquidity pool depth of Uniswap is also steadily growing. More importantly, this growth is not driven by one-time high subsidies but is based on tangible returns and continuous incentives. The quality of this growth is much higher than those projects that disappear after airdrops.
However, this also exposes a problem: USDD's current income is still quite dependent on the TRON chain. Of the $410 million in Smart Allocator, $383 million is on TRON, with only $20 million on Ethereum, and $0 on BNB Chain. This distribution is not very balanced. If there is any systemic issue on the TRON chain, USDD's income will be significantly impacted.
However, from the protocol’s layout perspective, they are also consciously improving this issue. Recently, they reached a cooperation with Stable L1, a new public chain, becoming an early ecosystem partner. Although Stable L1 is still in the early stages of its mainnet, gaining a first-mover advantage on such a new chain would be a great supplement to USDD's multi-chain layout.
Returning to the JST burn mechanism, this design actually provides a clear value capture path for the entire USDD ecosystem. Users holding USDD can earn 12% sUSDD income. The money earned by the protocol is used to buy back and burn JST. JST holders gain value from the reduced supply, while JST is also the governance token of USDD, allowing holders to vote on protocol parameters. These three elements form a closed loop.
The benefit of this closed loop is that it does not rely on external speculative trading but is based on the profitability of the protocol itself. As long as USDD can continue to generate income, this flywheel will keep turning. Moreover, as the scale expands, the rotation speed of the flywheel will increase. This endogenous growth model is much healthier than those projects that rely on narrative hype.
Of course, any model comes with risks. The biggest risk facing USDD is still the volatility of collateral. Currently, TRX occupies a large portion of the CDP vault. Although the collateralization ratio is over 250%, there is still a theoretical liquidation risk if the price of TRX experiences extreme drops. However, from the latest vault data, the health status is still quite good. The collateralization ratios of the TRX-A, TRX-B, and TRX-C vaults are all well above the safety line. Even if TRX halves, the system can still hold up.
Another vault worth watching is the USDT-A vault. This vault uses USDT as collateral, requiring only a 100% collateralization ratio since USDT is a stablecoin that theoretically won't experience extreme price fluctuations. However, this also means that if there are issues with USDT, such as regulatory actions against the issuer Tether or a reserve shortfall, USDD will also be affected. This is a systemic risk faced by all protocols that accept USDT as collateral.
However, it's worth noting that USDD has made efforts in risk control. There are not only multiple audits but also a PSM safety net mechanism. Even if there are issues with the collateral, users can redeem USDT or USDC through PSM at a 1:1 ratio, provided the PSM reserves are sufficient, making users' principal safe. Currently, the PSM reserves on TRON amount to over $60 million, with more than $10 million on Ethereum. This money serves as the last line of defense for USDD.
From a strategic perspective, what USDD is currently doing is very clear: it is using real money to create a DeFi moat. The 10% yield from JustLend, the liquidity rewards from Uniswap, and the continuous buyback and burn of JST are all substantial investments, not just empty promises. Additionally, these investments are supported by clear data, allowing you to see where every penny is spent and what effects are produced.
This level of transparency and execution is indeed rare in DeFi projects. Many projects start to float after raising funds, with various grand narratives and cross-industry collaborations, but actual deliverables are scarce. USDD takes a different path, focusing on actions rather than words, using data to speak and retaining users through returns. This pragmatic approach may not be very glamorous, but it is more reliable for long-term development.
Going forward, if USDD can make more efforts in multi-chain deployment and get the Smart Allocators running on BNB Chain, Avalanche, and others, the sources of income will diversify and the risks will be more dispersed. Simultaneously, by continuing to maintain high-frequency user incentive activities like JustLend and Uniswap, user stickiness will increase. At that point, USDD may not just be a stablecoin but a complete income ecosystem.
