Background

Who is Justin Sun?

According to Wikipedia Justin Sun is... An ambassador, Permanent Representative of Grenada to the World Trade Organisation, and a Geneva-based Chinese-Grenadian diplomat, entrepreneur, and business executive. He is best known as the founder of TRON (founded in July 2017), a blockchain DAO ecosystem.

He's also famous for acquiring BitTorrent in 2018 under TRON, which made one of the co-founders of the original organisation leave.

On top of that, Sun previously led development for Ripple’s China business. He founded Peiwo, a popular live chat App in China with over 10 million registered users, serving as its CEO until July 2017. He became a Davos Global Shaper in 2014 and was on the Forbes 30 Under 30 China and Forbes 30 Under 30 Asia list in 2017. Justin earned his MA from UPenn in 2013 and his BA in History from Peking University in 2011 source.

What is TRON?

Tron network, founded in 2017 (not to be confused with Tron 1982 which is the likely name origin), strives to create a decentralised internet ecosystem that is efficient, scalable and cost-effective. It has since evolved into one of the most active open blockchain & smart contract platforms in the world. It currently hosts more than 90 million user accounts and a robust portfolio of some 150+ daily active DApps that average over one million transactions per day. Tron stable-coin protocol is home to the largest USDT circulation with $40.7 billion, accounting for more than 50% of the total global supply.

Based in San Francisco, BitTorrent is behind the largest P2P communications protocol for file sharing with c. 100m MAU globally. The protocol is responsible for moving a significant part of the world’s Internet traffic on a daily basis. Turbo-charged as an offshoot of BitTorrent and Tron protocols, BTFS network is the next generation of decentralized web storage system. source.

Is he for real?

From the above information and his Instagram and Twitter we can at least establish that he is a real human being. His achievements from bing Ripple's China contact to founding his live chat App Peiwo and to finally acquiring BitTorrent and putting part of that under the TRON umbrella, as well as getting TRON to be home to the largest USDT circulation, accounting for more than 50% of the total global supply, appear to be very real indeed.

What I am still sceptical about, after reading this information about him are these two points:

1. Ripple
2. 50% of USDT supply on TRON

First and foremost Ripple has overpromised and under delivered time and time again as far as I can understand. To add to that they did not do good enough research to know how they should phrase their products so that officers of the law don't force a legal settlement or battle over them to start with. Mr. Sun, being a part of that umbrella should at least raise some eyebrows.

Secondly, somehow bringing more than 50% of the total USDT supply onto a chain that was in the top 3 chains but now is definitely not even close to the top 3 source, that should raise some eyebrows, especially after Tether Fails to disclose assets backing its stablecoin.

Given the above, I still will remain sceptical of Mr Sun and his intentions, even in the following sections...

Is USDD likely to accrue significant backing?

What is USDD?

• USDD resolves short-term price fluctuations and cyclical price risks with its responsive monetary policy and mintage mechanism. The following content will explain the USDD protocol in detail and how it stabilizes the price and grows the transaction scale.

1. The USDD stablecoin protocol decides which asset USDD should be pegged to because stability is relative, and pegging to a specific asset will meet the demand of more users.
2. The USDD protocol runs on the TRON network. TRON is a decentralized network where the external market decides token prices. Therefore, an efficient and stable price feed mechanism is needed to ensure the smooth running of the stablecoin system.
3. The protocol should be equipped with the tools to regulate the market against any price deviation from the predetermined value to maintain the stability of the currency price. The following section illustrates how the USDD protocol addresses the problems mentioned above source.

Sounds a lot like DAI + UST(ish) or USN combination? Well that's precisely what it sounds like to me as well!

Due to the doubts I personally have already build about Mr. Sun, I do not think it is a good idea to move any of my assets into this stable coin anytime soon (not financial advice).

Personal bias aside, this sounds interesting enough that it should at least be tested to see what its market fit is compared to other similar stablecoins.

30% Offering

source

How will its 30% offering fare over time?

First Anchor in the Terra ecosystem, then USN on Near with very similar offering to what Anchor was offering for a long time, now USDD on the Tron chain with an unreasonably high (in my opinion) 30% APY.

By looking at what happened to the yield reserve and the Anchor offering, we can learn a lot about how quickly a yield reserve gets depleted when the offering is too good. All it takes is a few big whales + a few looping-type protocols and your yield reserve is gone in no time, 4-8 months. In the case of Anchor a more sustainable idea of offering a dynamic rate has already been established to also slow down the depletion of the reserve.

Knowing all that about the Terra chain and the Anchor offering, we can easily speculate that this 30% APY is more like 14.8% (0.3/365 * 180 * 100) or 19.72% (0.3/365 * 240 * 100), as the yield reserve, assuming similar demand and interest, should deplete the no longer than 180-240 days in. This is all ceteris-paribus, assuming all else is equal, for example, that USDD does not lose its peg, that there is not a bank run when investors start getting weary of their money being it too high a risk, no hacks, e.t.c.

Even the 19.72% case (240 days) may be very interesting to some people, especially now that the Anchor rate is dropping month after month, until Borrow demand starts converging with the Deposit side. They could take a leap of faith, get in for even half of that amount and make a pretty good profit, then bridge out back into a less risky stablecoin asset. I mean let's do the math.

For a 10,000$ investment and with the 30%

1. Lasting (worst case) 120 days, investors can get 986.3$
2. Lasting 180 days, investors can get 1479.5$
3. Lasting (best case IMO) 240 days, investors can get 1972.6$

That is not bad at all, assuming that there are no black swan events and that the investor can then bridge their funds back to a less risk-on stablecoin asset. This is in fact a yield farmer's dream!!!

My opinion

I feel like Mr Sun may be a little late with this offering. Either that or that + Near coming up with their own offer of 20% will take a lot of the demand away from their offering. On the contrary, the fact that it has taken so long for TRON to come up with something like this can be attributed to the design being more robust than what I and others give it credit for being and also having enough time to raise a big enough reserve to allow a good run of incentives.

I am still very fearful of a bank run as soon as people get tired of what TRON has to offer or when/if there is a hack that will scare investors out of the token. That could cause investors to panic, which could lead to a cascade of de-pegging events, leading the token into a state of disarray.

IF (not financial advice), someone was looking to deploy capital in USDD, that someone should and would in my opinion have a good thesis of entering and exiting at short timeframes so that they can minimize the risk of all of the potential black swan events.