Key Takeaways:
- So-called “stablecoin”, USDD lacks transparency.
- Technical analyst, Duo Nine warns users about the risks involved in investing in USDD.
After the recent crash in the crypto market, investors have almost lost their faith in virtual assets. They have also been liquidating their assets. Even the authorities are reassuring users not to leave crypto based on the recent downfall.
After UST lost its peg earlier this month, doubts regarding the stability of stablecoins were also raised. There have also been controversies related to other stablecoins. To add more to the subject, cryptocurrency technical analyst, Duo Nine has recently debunked a myth about USDD on the Tron network in a Twitter thread. He has reviewed the status of USDD and questioned if it is at all a stablecoin or just another cryptocurrency.
The virtual currency that is native to the Tron network has been mentioned as “a cryptocurrency issued by the TRON DAO Reserve” in their white paper, which as explained by the analyst refers to it as a centralized currency and called out the abstract for being vague.
He further explains that USDD is not decentralized in an appropriate manner. The members of the Tron network like Alameda Research, Amber, Poloniex, Mirana, Ankr, and Multichain control the coin, its issuance, and burn. Therefore, in the true sense, the investors are trusting these members with their money. Even though the network is decentralized, the currency is not.
It is also mentioned in the white paper that the protocol should be “equipped with the tools to regulate the market”. Therefore, only the members hold the right to decide on the “monetary policy” for USDD.
Though it stresses that USDD is pegged to UST, the abstract does not mention that the peg should be at a 1:1 rate throughout.
Duo Nine has further explained the risks of investing in USDD. It can face a similar situation as Terra Luna if Tron starts issuing it against the TRX market cap without the presence of any backing. It will elevate the risks of crashing USDD/TRX.
Another concern is that the DAO members are only entitled to gain profits in all scenarios as they are managing the peg. Also, there is no guarantee that they will attempt to save the peg if the value crashes.
The analyst warns the users that USDD holds no transparency in terms of its status as a stablecoin and as well as its backing. He has opined that the coin is “neither decentralized nor a safe stablecoin”.
Therefore, his advice to the users is to look past the +30% yield that USDD offers and to question if it is worth investing in after learning the risks involved.
