Justin Sun recently just announced USDD 2.0, calling it the only "true decentralized stablecoin."

And he's offering 20% APY for those who stake the tokens.

That’s a big incentive, but anyone who remembers Terra Luna and hears “20% for staking stablecoins” knows how unsustainable that can get.

Let’s break it down.

The Sales Pitch

Sun is out here claiming USDD is everything other stablecoins aren't.

He says it can't be frozen (like everyone’s favorite USDC can,) that it can't be rugged (allegedly,) and that it has no central control (again, allegedly.)

And it's all backed by $2.6B in reserves (which are more likely in TRX and USDT, but we'll get to that...)

Where Does 20% Come From?

When asked how they're paying that juicy 20% APY, Sun responded: "We have plenty of money."

That’s a statement that will make any nervous Terra UST flashbacks intensify.

But, for those who haven’t yet run for the hills and far away from USDD, let’s keep going. 

USDD has a pretty strong 120% collateral ratio – that buys back some confidence, right?

Well, that depends on how bullish on crypto you are – that collateral is mostly TRX tokens. 

And the whitepaper hasn't been updated since 2022, so make of that what you will.

Let’s Talk Numbers

USDD currently sits at a cute $740M market cap. 

Meanwhile, Tether is at $139B, and USDC hovers around $53B. 

The total stablecoin market is a whopping $224B, so USDD isn’t exactly a market leader at the moment.

However, if folks buy into the APY story, that could change. 

USDD’s 20% APY trumps DAI’s 12% and makes USDC’s 4.1% look teeny in comparison. 

But if those numbers remind you of Terra's 30% Anchor yield... well, you're not alone.

Red Flags Galore

When Terra blew up in 2022, it caught everyone by surprise.

That protocol was supposed to be ironclad, and, just like Sun is now quipping, they allegedly had plenty of money. 

Those "sustainable" high yields weren’t so sustainable after all. 

And their whitepaper actually got updated occasionally, which is more than we can say about USDD.

Not to mention that Europe has been cooking up some regulations that have already seen big delistings for USDT and even has USDC in some hot water.

You might think that spells good news for USDD, but Europe is also planning to ban algorithmic stablecoins – no silver lining for Sun there. 

How Does This End?

TRON's ecosystem is pumping right now, with $3.6 trillion in daily transfers.

How much of that is legitimate volume is up for debate, but if even a fraction of that volume finds USDD’s 20% APY tempting, it could pump that market cap significantly.

But remember: If it looks too good to be true, it probably is.

Stay safe out there, yield farmers – this cycle’s Luna might just be Sun.