If USDD is "overcollaterized", why did it lose its peg?

[Abiky]

Can someone explain to me why TRON's overcollaterized stablecoin lost its peg a few days ago? It's not exactly an algorithmic stablecoin like UST was, so this wasn't supposed to happen. With TRON DAO having a huge allocation of coins in its reserve, the peg should've been restored by now. Does this mean collaterized stablecoins will have the same fate as algorithmic ones? If that's so, then DAI will be the next one on the list to lose it peg.

Thoughts?

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[dbshck]

With TRON DAO having a huge allocation of coins in its reserve, the peg should've been restored by now.

That's right, the TDR can easily restore the peg by injecting several million dollars from their reserve. But for some reason, they haven't utilized their reserve to maintain the peg.

Does this mean collaterized stablecoins will have the same fate as algorithmic ones? If that's so, then DAI will be the next one on the list to lose it peg.

Unlikely, DAI has on-chain mechanisms to maintain the $1 soft peg and has been battle-tested through many crises, even the recent LUNA/UST crash. USDD, on the other hand, still relies on the TDR to do it.

[Bitcoins101]

This crash will all be worth it if Justin Sun gets rekt.

[ragini330]

This crash will all be worth it if Justin Sun gets rekt.
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[tvplus006]

...It's not exactly an algorithmic stablecoin like UST was, so this wasn't supposed to happen. With TRON DAO having a huge allocation of coins in its reserve, the peg should've been restored by now. Does this mean collaterized stablecoins will have the same fate as algorithmic ones? If that's so, then DAI will be the next one on the list to lose it peg.

No, these are identical algorithmic stablecoins, and their support is carried out by the main coin of the corresponding blockchain. Their only difference lies in the capitalization, which in USSD is 15 times lower that was on UST. It is for this reason that it is still possible to restore the value of USDD, since it is easier to redeem the surplus of this stablecoin.

[tbct_mt2]

Over collateral does not help in USDD case. It is not something like forced liquidation. The issue with USDD and other stable coins is trust and fear of investors. When investors are fearful, they will exit and cause bank-runs. Collateral can not save you from bank run that will be stopped only if investors get rid of their fear.

The response to over collaterize USDD can help to calm down investors but so far, this sort of effect is not clear. Let's see.

[Abiky]

That's right, the TDR can easily restore the peg by injecting several million dollars from their reserve. But for some reason, they haven't utilized their reserve to maintain the peg.

Maybe the TDR is an "exit scam" by Justin Sun himself. I'd be surprised if he decides to run away with the money. We'd have to carefully inspect the smart contract's code to see if it gives TRX's founder the ability to do that. A fraudulent stablecoin will be a major blow to the crypto industry (just like what happened with Terra/LUNA/UST lately). With how unstable algorithmic "stablecoins" have proven to be, people will only trust stablecoins with real USD reserves and those that are truly collaterized like DAI. Let's see how everything will play out in the long run.

Unlikely, DAI has on-chain mechanisms to maintain the $1 soft peg and has been battle-tested through many crises, even the recent LUNA/UST crash. USDD, on the other hand, still relies on the TDR to do it.

Maker's done a good job in helping DAI maintain the peg after all these years. Even after the recent market turmoil (caused by the collapse of Terra/LUNA/UST), the decentralized stablecoin's dollar value hasn't moved an inch. If only other decentralized stablecoins copied DAI's model, things would've been much better in the crypto/Blockchain space. Scandals like the UST crash gives crypto a bad reputation among people in the mainstream world. USDD already failed, so there's nowhere else to look for except to choose an alternative that lives up to its claims. Just my opinion

[Johnnyrig]

USDD is more his way to offload tron without killing the price. Seriously Justin sun minted 94% of the supply from USDD.... even those guys are just exit scammer / or Ponzi. Another algo stable goes to dust with one guy making money from it.

[serjent05]

Can someone explain to me why TRON's overcollaterized stablecoin lost its peg a few days ago? It's not exactly an algorithmic stablecoin like UST was, so this wasn't supposed to happen. With TRON DAO having a huge allocation of coins in its reserve, the peg should've been restored by now. Does this mean collaterized stablecoins will have the same fate as algorithmic ones? If that's so, then DAI will be the next one on the list to lose it peg.

Thoughts?

It looks like this article[1] has an explanation of why the USDD lost its peg a few days ago.

It stated that there are 3 reasons namely:

1. Market sentiment
2. stETH was losing peg and then causing the chain of reaction (ETH – TRX takes a big correction)
3. USDD mint/burn mechanism

You can read the explanation through the source link below

It looks like algorithmic stable coins aren't as great as they boasted.

Btw, if you are wondering how USDD works you can check this diagram

Specifically, USDD will be pegged to the US dollar, with 1 USDD corresponding to 1 USD. In the immediate future, the value of USDD will be backed by TRON’s TRX token. To get USDD, users need to key their TRX to receive a corresponding amount of USDD. In case you want to get TRX back, you just need to do the opposite.

[1] https://news.coincu.com/98915-usdd-depeg-3-reasons-why-usdd-lost-peg/

[Abiky]

It looks like this article[1] has an explanation of why the USDD lost its peg a few days ago.

It stated that there are 3 reasons namely:

1. Market sentiment
2. stETH was losing peg and then causing the chain of reaction (ETH – TRX takes a big correction)
3. USDD mint/burn mechanism

You can read the explanation through the source link below

It looks like algorithmic stable coins aren't as great as they boasted.

Btw, if you are wondering how USDD works you can check this diagram

Specifically, USDD will be pegged to the US dollar, with 1 USDD corresponding to 1 USD. In the immediate future, the value of USDD will be backed by TRON’s TRX token. To get USDD, users need to key their TRX to receive a corresponding amount of USDD. In case you want to get TRX back, you just need to do the opposite.

[1] https://news.coincu.com/98915-usdd-depeg-3-reasons-why-usdd-lost-peg/

Based on what you've described here, it looks like USDD is no different than Terra's UST stablecoin. This explains why TRON's stablecoin went downhill in an instant. If selling pressure continues, then it might become extremely worthless in the long run. That's what you get when you invest in an unregulated stablecoin backed solely by algorithms. The trusted third party is necessary for stablecoins to maintain their peg. There's no other way around it.

By choosing regulated stablecoins, you can feel confident your investment won't go downhill overnight. That's because there are investor protections which prevents the issuing company from doing anything it wants. USDC and USDT may be the only stablecoins worth the investment as they've maintained their peg since day one (although USDT has been on the brink of losing its peg over the last few days). USDD failing will be a huge blow for Justin Sun's TRON project, leaving investors "rekt" in the process. I'd steer clear from it until the peg is restored. Just my thoughts

[cryptoaddictchie]

USDD is more his way to offload tron without killing the price. Seriously Justin sun minted 94% of the supply from USDD.... even those guys are just exit scammer / or Ponzi. Another algo stable goes to dust with one guy making money from it.

Not to be a hater but Justin Sun is really a pro ponzi scheme artist. The introduction of USDD is timely aftet the downfall of UST meaning he just want to show off that with this move, he can overruled the fear by other investors on what happened on its fate. But literally challenged the system for what? People fomoing and mostly USDD supply probably is on his disposal.

It will take some time before it happened to tron, but if Justin will be careless like Do Kwon, its not impossible especially there are lots of whale hate Justin Sun.

[Abiky]

Not to be a hater but Justin Sun is really a pro ponzi scheme artist. The introduction of USDD is timely aftet the downfall of UST meaning he just want to show off that with this move, he can overruled the fear by other investors on what happened on its fate. But literally challenged the system for what? People fomoing and mostly USDD supply probably is on his disposal.

It will take some time before it happened to tron, but if Justin will be careless like Do Kwon, its not impossible especially there are lots of whale hate Justin Sun.

Justin Sun always shills his projects in order to get what he wants. He doesn't care about decentralization as long as his pockets are filled with money. Just like he destroyed the Steem project by manipulating the network's witnesses (validators) for his own personal benefit. USDD and UST are exactly the same thing with different names. If investors are careless, they could lose it all in an instant if USDD goes all the way down the drain.

I would steer clear from any algorithmic stablecoin as they're prone to failure. Only collaterized and regulated stablecoins like USDC and BUSD have a future. Tether claims to be regulated, but its quite shady in its disclosure of USD holdings. Fortunately, regulators will be weighting into the stablecoin industry to minimize scams/frauds as much as possible. Who knows if this becomes the time for the cleansing of the crypto market? Just my opinion

[tbct_mt2]

Not to be a hater but Justin Sun is really a pro ponzi scheme artist. The introduction of USDD is timely aftet the downfall of UST meaning he just want to show off that with this move, he can overruled the fear by other investors on what happened on its fate. But literally challenged the system for what? People fomoing and mostly USDD supply probably is on his disposal.

It will take some time before it happened to tron, but if Justin will be careless like Do Kwon, its not impossible especially there are lots of whale hate Justin Sun.

We can not ask for decentralization in TRON and USDD at least now. At least so far, Justin Sun has better reserve for his USDD stable coin. He did not sacrifice TRON to save USDD. That is different than Do Kwon as he sacrificed $LUNA to save $UST. When both died, he changed his mind and say Terra is more than $UST. I can not believe in this guy.

I would steer clear from any algorithmic stablecoin as they're prone to failure. Only collaterized and regulated stablecoins like USDC and BUSD have a future. Tether claims to be regulated, but its quite shady in its disclosure of USD holdings. Fortunately, regulators will be weighting into the stablecoin industry to minimize scams/frauds as much as possible. Who knows if this becomes the time for the cleansing of the crypto market? Just my opinion

Algorithm stable coins are very risky. From their algorithm and from the concept to back a stablecoin by a very volatile asset. That is unrealistic. If you want to make a reserve to back a stable coin, the asset you use to back it should be a stable one. The best is US dollar because the mission of a stable coin is its peg 1:1 against US dollar. Best asset in reserve should be US dollar, not any thing else.

Even gold is unstable and can not be considered as a safe backing asset in reserve and collateral.

[cryptoaddictchie]

I would steer clear from any algorithmic stablecoin as they're prone to failure. Only collaterized and regulated stablecoins like USDC and BUSD have a future.

Actually yes. These are two of the stablecoim I only have and way more trusted than other ones. USDD can still keep up for now but when too many whale decided to fuck up and found a loop hole on Justin, for sure they wont hesitate to bring tron as well just like what happened to arrogant Do Kwon.

We can not ask for decentralization in TRON and USDD at least now. At least so far, Justin Sun has better reserve for his USDD stable coin. He did not sacrifice TRON to save USDD. That is different than Do Kwon as he sacrificed $LUNA to save $UST. When both died, he changed his mind and say Terra is more than $UST. I can not believe in this guy.

Thats the difference. Justin has way more than deep pocket than Do Kwon and he can able to generate funds to fight backs those trying to pull him down. Its a long way to go to beat down tron, and I assume they will strive even for a longer term. Just that this system has loophole and they should be very careful. Also reminding the investors to not go all in with the sweet apr they are seeing now.

[tbct_mt2]

Thats the difference. Justin has way more than deep pocket than Do Kwon and he can able to generate funds to fight backs those trying to pull him down. Its a long way to go to beat down tron, and I assume they will strive even for a longer term. Just that this system has loophole and they should be very careful. Also reminding the investors to not go all in with the sweet apr they are seeing now.

Being richer and have more money in pocket are not helpful if he does not intend to save USDD and TRON. Do Kwon made a bad decision to choose one and leave another die and what he chose is simply a serious mistake. If he chose $LUNA, he should save it rather than kill both tokens. Terra Foundation Guard used their reserved to save UST and failed. In the end, they lost most of money and can not save anything.

Justin Sun from beginning of the USDD de-peg crisis chose a good way to handle it. Spend money and try to handle the crisis. At least now we can see USDD gradually reclaims its peg. It is supported by general market too. Personally I still feel unsafe with algorithm stable coin, not only USDD. We don't know how bad the market will be and company can not make over collaterization forever. It has limited capital in pocket.

[zasad@]

In order to attack the USDD stablecoin, manipulators need to hold a large portion of the coins in order to cause panic selling and reduce liquidity in the pools. As long as the USDD capitalization is small, they resist attacks and will buy back their stablecoins.

[Abiky]

Being richer and have more money in pocket are not helpful if he does not intend to save USDD and TRON. Do Kwon made a bad decision to choose one and leave another die and what he chose is simply a serious mistake. If he chose $LUNA, he should save it rather than kill both tokens. Terra Foundation Guard used their reserved to save UST and failed. In the end, they lost most of money and can not save anything.

Justin Sun from beginning of the USDD de-peg crisis chose a good way to handle it. Spend money and try to handle the crisis. At least now we can see USDD gradually reclaims its peg. It is supported by general market too. Personally I still feel unsafe with algorithm stable coin, not only USDD. We don't know how bad the market will be and company can not make over collaterization forever. It has limited capital in pocket.

Justin Sun better play his cards right for the good of the crypto/Blockchain industry. Otherwise, another collapse like Terra/LUNA will further diminish investors' confidence into cryptocurrencies as reliable, long-term investments. You can bet prices will further decline if something like that happened now. Last time I've checked, USDD's peg was restored so I guess Justin proved me wrong. Still, USDD is a risky algorithmic stablecoin so I'd proceed with caution just in case. With regulators paying close attention to crypto's latest developments, we might see investor protections further down the road. Who knows if USDD becomes the first algorithmic stablecoin to hold its peg for generations? Just my thoughts

[malcovi2]

Being richer and have more money in pocket are not helpful if he does not intend to save USDD and TRON. Do Kwon made a bad decision to choose one and leave another die and what he chose is simply a serious mistake. If he chose $LUNA, he should save it rather than kill both tokens. Terra Foundation Guard used their reserved to save UST and failed. In the end, they lost most of money and can not save anything.

Justin Sun from beginning of the USDD de-peg crisis chose a good way to handle it. Spend money and try to handle the crisis. At least now we can see USDD gradually reclaims its peg. It is supported by general market too. Personally I still feel unsafe with algorithm stable coin, not only USDD. We don't know how bad the market will be and company can not make over collaterization forever. It has limited capital in pocket.

Justin Sun better play his cards right for the good of the crypto/Blockchain industry. Otherwise, another collapse like Terra/LUNA will further diminish investors' confidence into cryptocurrencies as reliable, long-term investments. You can bet prices will further decline if something like that happened now. Last time I've checked, USDD's peg was restored so I guess Justin proved me wrong. Still, USDD is a risky algorithmic stablecoin so I'd proceed with caution just in case. With regulators paying close attention to crypto's latest developments, we might see investor protections further down the road. Who knows if USDD becomes the first algorithmic stablecoin to hold its peg for generations? Just my thoughts

No, it cant hold for long, its printing money and do you really think that they will use their own money to bail out people if USDD value crashes?

[Abiky]

No, it cant hold for long, its printing money and do you really think that they will use their own money to bail out people if USDD value crashes?

If they're printing more USDD, then you can bet the stablecoin's peg will fall in no time. Tether did something similar a while ago, where it printed more units of the stablecoin for no reason. It raised alarms of getting de-pegged from the USD after "magically" inflating the coin's supply. Fortunately, Tether stopped doing such practice after the UST collapse.

I hope USDD doesn't take the same path as its counterpart (UST) or the crypto market will suffer. We need as much legitimate stablecoins as possible in order to attract as much investors into the crypto market. Regulators are paying close attention to the development of stablecoins, so it should only be a matter of time before the whole market is cleansed. Who knows what will be of USDD in the future? Just my thoughts

[Jaered]

Yeah, USDD depegging got us surprised because Tron made it clear they were over-collaterized but then within a day, they got back the peg after reaching for their assets. Maybe some investors wanted to test out their peg strength early on, and its not even been up to 3 months it was brought into the stable market