Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


Is Decentralized USD (USDD) a strong Stablecoin?

Interest in the Decentralized USD (USDD) is high. CoinMarketCap proclaimed Decentralized USD the fifth most trending cryptocurrency on 18 June 2022.

So what is Decentralized USD (USDD) and how does it differ from other stablecoins? They call Decentralized USD a decentralized and over-collateralized stablecoin. They also call USDD “Chain-Agnostic.”

They claim a decentralized stablecoin system makes Decentralized USD tamper resistant and freeze free. They describe this system as independent from centralized authority.

An Over-Collateralized Stablecoin

Chain-Agnostic means that USDD circulates on several blockchains, including TRON, Ethereum (ETH), the Binance Smart Chain (BNB), and other networks. Decentralized USD uses the BitTorrent Chain cross chain to operate on multiple blockchains.

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Decentralized USD (USDD) is over-collateralized because the amount of assets it holds exceeds the amount of USDD circulation. To explain, most stablecoins contain a smart contract that makes payment in fiat currency from a bank account or blockchain ecosystem when you spend the stablecoin. For example, USDD makes payment in US Dollars when you spend it.

They claim the assets in Decentralized USD’s staking pools exceed the value of the USDD in circulation by 130% or more. Theoretically, being over-collateralized ensures there will always be dollars available to Decentralized USD spenders.

USDD’s Assets

On 21 June 2022, they claimed Decentralized USD had a collateralization ratio of 326.27%. They claimed there was a Total USDD Supply of $723.322 million on 18 June 2022.

In contrast, they claimed there was $2.360 billion in USDD on 21 June 2022. The amount of USDD authorized was $2 billion, and the amount authorized but not issued was $1.277 billion on 18 June 2022.

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On 21 June 2022, Decentralized USDD’s Total Collateral comprised 10.875 billion TRON (TRX), 14,040.6 Bitcoin (BTC), 140.014 million Tether (USDT), and 1.08 billion USD Coin (USDC).

Instead of accounts, they hold the assets that back Decentralized USD (USDD) in staking pools. Nine staking pools back Decentralized USDD. Those pools include USDD/USDT, USDD/USDT, USDD/TrueUSD(TUSD)/USDT, USDD/TRX, USDD/USDT, USDD, USDD/Binance USD (BUSD), USDD/ (3CRV), and Ellpsis (EPS)/USDD.

What Value does Decentralized USD (USDD) offer?

Mr. Market thinks Decentralized USD (USDD) offers some value. For example, USDD was the 60th largest cryptocurrency on 21 June 2022.

Interestingly, Decentralized USD doesn’t achieve the stablecoin goal of matching the value of a US Dollar. For example, CoinMarketCap gave USDD a 97.53₵ Coin Price on 21 June 2022.

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CoinMarketCap also gave Decentralized USD a $705.421 million Market Capitalization, a $704.758 million Fully Diluted Market Cap, and an $84.251 million 24-Hour Market Volume on 21 June 2022. They based those numbers on a Circulating Supply of 723.764 million USDD.

 Conversely, CoinBase gave Decentralized USD a 97₵ Coin Price, a $705.5 million Market Cap, and a 24-Hour Market Volume of $103 million on 21 June 2022. They based those numbers on a Circulating Supply of 723.3 million USDD. I consider Decentralized USD an unstable stablecoin because CoinBase gave it an all-time high Coin Price of $1.01.

How Much is Decentralized USD Worth?

To explain, a stablecoin’s Coin Price is supposed to match the value of the fiat currency it pegs to. For example, Tether (USDT) and Decentralized USD (USDD) are supposed to have a $1 Coin Price.

Stablecoin coin prices often differ from the fiat currency because Mr. Market sets the Coin Price. The Coin Price is the value Mr. Market will pay for the stablecoin, not the value of the assets that theoretically back the Coin Price.

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For example, Mr. Market thinks Decentralized USD is worth less than a dollar because he is skeptical. In particular, I think Mr. Market fears Decentralized USD could meltdown as TerraUSD did in May 2022.

TerraUSD (UST) became unpegged from the US Dollar on 9 May 2022. By 18 June 2022, CoinMarketCap gave something they call TerraClassicUSD (USTC) a $0.008322 Coin Price. Hence, TerraClassicUSD was worth less than 1₵.

Decentralized USD (USDD) is an Unstable Speculative Investment

Therefore, stablecoins are unstable and can collapse. Thus, I consider Decentralized USD (USDD) an unstable speculative investment. I think speculators need to avoid Decentralized USD because it could collapse.

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In particular, I think speculators need to fear any asset that pretends to be something it is not. To explain, they call Decentralized USD (USDD) a stablecoin.

I disagree, I think Decentralized USD is a decentralized autonomous organization (DAO) or DeFi protocol that supports a payment system. Decentralized could be profitable DAO or DeFi platform, but it is not a stablecoin. Hence, speculators seeking stablecoins need to stay away from USDD.