As the cryptocurrency – USDD sector continues to grow and digital assets become more well-known, pump-and-dump frauds and Ponzi schemes are becoming more widespread.
Notably, Stephen Findseisen, also known as Coffeezilla, has questioned a brand-new stablecoin named USDD (USDD), a digital currency released by the TRON DAO Reserve. In fact, the YouTuber discussed a potential Ponzi scheme with the just released stablecoin in his video that was published on June 24.
There has been debate regarding the investors’ possible exposure to risk because the USDD’s performance has frequently lagged behind the $1 peg. The USDD had a substantial drop with the collapse of the dollar peg on June 13, it hit a low of $0.93 before rising to its former level of $0.98.
Findseisen pointed out some major parallels and differences between the two coins after the Terra (LUNA) ecosystem collapsed, as well as the fact that DeFi’s claim to be a Ponzi scheme is not totally true.
Who was the person behind USDD?
The billionaire Justin Sun, who is quite a controversial person in his own right and has fled several countries out of fear of punishment, is the man behind the new stablecoin. At the same time, a former worker claims that they were constantly engaging in insider trading.
Sun acknowledges that “after observing Terra’s remarkable ascent, we came up with the idea for USDD.” Although it doesn’t look good, he released USDD just a few days before Luna’s collapse in an effort to persuade people that this stablecoin is unique.
Justin asserts that Terra’s demise was caused by quick development and enormous leverage, and he vows to avoid the same error.
Comparison between UST and USDD
There are many similarities between TerraUSD and USDD. Both identify as algorithmic stablecoins, which basically means they rely on arbitrage to keep their value at one dollar. Both advertise high rates of return but acknowledge that these are probably unsustainable over the long term.
The discrepancies start with the fact that USDD is just approximately a month old and already has a market cap of about $700 million, whereas Terra failed after amassing billions of dollars.
Additionally, because the Arbitrage project’s mechanism has been disabled and the ability to mint new USDD is limited to a small number of whitelisted organizations like Alameda Research, USDD does not currently function as an algorithmic stable coin.
This is significant because, at least temporarily, it shields USDD from the famed algorithmic death spiral. Only when burning and minting are active can the algorithmic death spiral take place.
Given that it is closely managed by a small number of whitelisted organizations, the level of decentralization that the USDD really has is called into doubt by CoffeeZilla.
“Like all Ponzi schemes, this one says it’s different Luna failed after it offered 20% a year and attracted billions of dollars in Investments USDD is changing the game by offering something different offering double the amount of interest nearly 39.6% per year, according to their website, and they claim it’s risk-free.”
Not really decentralized is the USDD
CoffeeZilla claims that the situation is significantly worse than just being under the control of a select few whitelisted institutions because, with access to what is almost certainly Justin Sun’s wallet, it is possible to determine the exact amount of USD that Justin’s Son is responsible for minting.
The research determined that the correct figure is 683 million tokens, out of a total of 723 million tokens that have ever been produced. Despite wishing to see USDD expand naturally and decentralized, this shows that Sun personally created 94% of all stablecoin tokens that are now in existence.
“Not only do I obviously think this coin is offering an unsustainable yield. I think it is also a really clever way for Justin Sun to offload TRON without affecting price,” Findseisen said.
Justin Sun’s claim that he’s a big fan of decentralization he also said that’s the whole reason for the need of an algorithmic stablecoin in the first place.
“I think the most important answer, at least for myself is that an algorithmic stablecoin allows you make and take decisions in your own hands. I think these days a stablecoin is the most centralized part of the decentralized world,” Sun previously said.
Retailers should avoid the honeypot
“USDD looks like a honeypot for retail traders to get dumped on by Justin Sun himself,” the YouTuber alleged.
The total value of the portfolio of cryptocurrencies held by the Tron DAO Reserve, which is used to back all of the tokens in circulation, is $2.31 billion.
The over-collateralization of numerous significant digital assets, including TRX, BTC, and USDT, protects the reserve assets that USDD represents.
The total value of the assets that have been collateralized when the collateral ratio is set at 130% is substantially more than the total quantity of USD that is now in circulation.
DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.
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