TWEETSTORM is an occasional feature on decentralize.today where we share threads, mostly from Twitter, that we think deserve a wider audience, some are informative, some educational, some amusing and others yet are controversial...we dig these out for you so you don't have to!
1/ This is nuts @usddio @trondaoreserve & @trondao are deceiving the market with $USDD They are claiming that $USDD is collateralized at over 200% and this information is technically FALSE I'm gonna explain why
2/ According to their articles, they claim that collateral ratio is over 200% Let's check some data at https://tdr.org/#/ - $USDD supply = 667M - $TRX burnt = $667M = $USDD supply - Reserves = $787M - Collateral ratio = 218%
3/ Collateral ratio is defined as the ratio between the collateral and the issued stablecoin: Collateral ratio = Reserves / Total_USDD_issuance = 787 / 667 = 118% Huh? Why does the website show Collat. Ratio = 218% then?
4/ Well, they are considering the 8.29B $TRX burnt as collateral!
5/ They use this formula: Collat. Ratio = (Reserves + TRX_burnt) / Total_USDD_supply then Collat. Ratio = Reserves / Total_USDD_supply + TRX_burnt / Total_USDD_supply If $TRX goes up in price. All good. If $TRX goes down in price, then TRX_burnt / Total_USDD_supply < 1
6/ "Well, they have other reserves..." ha! let's explore that as well Reserves = 13,040 $BTC + 240M $USDT + 1.9B $TRX Are you kidding me? You didn't have enough with claiming $TRX burnt is collateral. You also had to add it to the "Reserves"
7/ The same coin that is designed to be minted when $USDD is redeemed, is used as a Reserve Asset. Seems safe! "Hey $UST guys, it's okay, everything is backed by $LUNA tokens, we can't go to 0" Out of the $787M in the "Reserves", $156M are in the form of $TRX. A whopping 20%
8/ The Collat. ratio should be considered (1) without the burnt $TRX and (2) without $TRX in the Reserves - If we substract (1) --> Collat = $787M & Collat. Ratio = 118% - If we substract (1) and (2) --> Collat = $631M & Collat. Ratio = 95% Let's remember $USDD supply = $667M
9/ Let's then recapitulate. As per the formula they use: Collat. Ratio = Reserves / Total_USDD_supply + TRX_burnt / Total_USDD_supply - If $TRX goes down in price, then TRX_burnt / Total_USD_supply < 1 (it doesn't really make sense to even discuss this, but anyways)
10/ You have the other part of the equation: Reserves / Total_USDD_supply As you see, if you currently substract $TRX value from the Reserves, Reserve < Total_USDD_supply Can that happen? Well, if $USDD starts to be sold, more $TRX will be minted and the $TRX price will go down
11/ If it goes down enough so that $BTC + $USDT + $TRX < Total $USDD then you have a problem and $USDD would depeg So if $TRX price goes up, all good. If $TRX price goes down, not that good. Does that remind you of something?
12/ Summarizing: They claim to have a 218% collateral ratio, out of which: - 100% is the $TRX burnt to mint $USDD- 24% is $TRX in Reserves (the asset involved in the minting / burning mechanism) Real collateral is 118% Substracting $TRX from the Reserve, Collat. Ratio = 95%