USDD 2.0 Strengthens Position as a Decentralized, Overcollateralized Stablecoin

Launched in May 2022 by the TRON DAO Reserve (TDR), Decentralised USD (USDD) originally entered the market as a hybrid algorithmic stablecoin. In response to widespread skepticism surrounding algorithmic stability mechanisms, the project underwent a major transformation in January 2025. This restructuring introduced an Over-Collateralized Decentralised Stablecoin (OCDS) model, officially branded as USDD 2.0.

The upgrade aligned USDD with the Collateralized Debt Position (CDP) framework pioneered by Sky (formerly MakerDAO) through its DAI stablecoin. The result is a more transparent, verifiable, and trust-oriented architecture that enhances USDD’s long-term stability and resilience.

A Decentralized Alternative to Centralized Cash Stablecoins

USDD aims to serve as a censorship-resistant, decentralized alternative to fiat-backed stablecoins such as USDC and USDT, both of which rely on private custodians holding short-term treasuries as collateral. By operating entirely on-chain and governed through decentralized mechanisms, USDD offers users transparency and autonomy unmatched by its centralized counterparts.

Rapid Growth After the Upgrade

Since the introduction of USDD 2.0, the stablecoin has tripled in market capitalization within eight months, reaching a circulating supply of $462.58 million. Initially launched on the TRON blockchain, USDD expanded its native deployment to Ethereum on September 8, 2025. Within just four days, over $8 million worth of USDD was minted on Ethereum, pushing total Ethereum supply to $8.88 million, while TRON-native issuance stands at $452.42 million.

Collateral reserves across both networks remain robust, with TRON-based collateral valued at $496.76 million and Ethereum-based collateral at $9.34 million, maintaining overcollateralization well above the outstanding USDD supply.

Expansion to Binance Smart Chain

To further broaden its ecosystem, USDD recently announced plans to expand native issuance to Binance Smart Chain (BSC). The move aims to enhance interoperability and extend the range of DeFi protocols that can integrate USDD, significantly increasing its total addressable market.

Core Stability Architecture

USDD’s design rests on four interconnected mechanisms that maintain its dollar peg: overcollateralization, the CDP system, the Peg Stability Module (PSM), and the Smart Allocator.

The overcollateralization system ensures that reserves consistently exceed outstanding liabilities, with minimum ratios of 120–150% and current vault levels surpassing 250% for most assets. The CDP mechanism enables users to lock TRX, sTRX, or USDT as collateral to mint USDD, maintaining a healthy buffer between asset value and issued debt.

The Peg Stability Module supports price equilibrium through a zero-slippage swap mechanism, allowing seamless exchanges between USDD and other stablecoins such as USDT and USDC. Arbitrage incentives within the PSM ensure that market deviations from the $1 peg remain minimal.

Meanwhile, the Smart Allocator functions as a yield engine that deploys a portion of reserves into platforms like Aave and JustLend, generating sustainable returns. The module currently yields an annualized 3.94% APY with $4.93 million in cumulative earnings from $394.84 million in allocated capital.

Transparent Collateral Management

Collateral assets consist primarily of TRX, sTRX, and USDT, all held in auditable smart contracts on TRON and Ethereum. Real-time verification of reserves is available through the public USDD data dashboard.

This setup enables TRX holders to unlock liquidity without selling their holdings. Vaults such as TRX-A, TRX-B, and TRX-C facilitate minting, while the sTRX-A vault allows users to earn the 6.74% staking yield from JustLend DAO alongside immediate liquidity through USDD. The SA001-A vault, representing the Smart Allocator, channels additional returns to sUSDD holders, improving overall capital efficiency across the TRON ecosystem.

Automated Liquidation and Auction Controls

USDD’s solvency is safeguarded by automated liquidation and auction systems. When a vault’s collateral ratio falls below the liquidation threshold—typically 150%—automated “Keeper” bots trigger collateral seizure and sale via Dutch auctions. The mechanism ensures undercollateralized positions are promptly resolved, while penalties and residual returns maintain fairness and transparency.

Risk alerts, sent via web and email notifications, warn users when their collateral ratios approach critical levels, helping them avoid forced liquidations.

Expanding DeFi and Exchange Integrations

The USDD and JUST DAO teams continue to integrate the stablecoin into leading DeFi platforms. On TRON, JustLend serves as the main lending partner supporting sTRX-based CDPs, while on Ethereum, Aave integration provides conservative lending yield opportunities.

USDD is also widely used in liquidity pools on TRON’s SunSwap DEX, with available pairs such as USDD/TRX and USDD/USDT. Lending USDD on JustLend currently offers an APY of 5.01%, while centralized exchanges provide additional yield opportunities for TRON-based users.

Introduction of sUSDD: Yield-Bearing Stablecoin

In October 2025, USDD launched sUSDD, a yield-bearing derivative token offering a fixed 12% APY. Mintable on Ethereum, sUSDD continuously accrues value through an appreciating exchange rate derived from Smart Allocator revenue. The product represents a key step in transforming USDD from a transactional stablecoin into a broader yield-generating asset class.

Conclusion

With its evolution into an overcollateralized stablecoin backed by transparent reserves, USDD has solidified its role as a cornerstone of the TRON ecosystem. Its multichain expansion, growing market capitalization, and strong collateral ratios position it as one of the most credible decentralized alternatives to centralized stablecoins like USDT and USDC.

As it continues to expand across chains—including Ethereum and Binance Smart Chain—USDD is increasingly shaping the future of decentralized finance, offering a stable, yield-generating foundation for the next phase of the DeFi economy.