Sun Yuchen's USDD launched on Ethereum, entering the stablecoin market.

As the stablecoin market size surpasses $2.5 trillion, competition is becoming increasingly fierce. The USDD stablecoin, launched by TRON founder Justin Sun, officially went live on the Ethereum network on September 8, 2025, marking its new challenge to the mainstream stablecoin market. USDD not only introduces a Peg Stability Module (PSM) for seamless exchange with USDT and USDC but also attracts early users with an annual percentage rate (APY) of up to 12%, attempting to carve out a share in Ethereum's $165 billion stablecoin market. However, in the face of Tether's dominant market capitalization of $169 billion, USDD's scale and influence still face severe challenges.

The release and incentive mechanism of USDD

USDD is an over-collateralized algorithmic stablecoin that was initially launched on the TRON blockchain, aiming to maintain a 1:1 peg to the US dollar through algorithmic mechanisms while providing high on-chain yields. Its Ethereum contract has been audited by CertiK and officially launched on September 8. The newly introduced Peg Stability Module (PSM) allows users to directly exchange USDT and USDC at a 1:1 ratio, ensuring efficient liquidity and price stability.

To attract Ethereum users, USDD launched an airdrop event on September 9, offering tiered yield rewards. The initial Annual Percentage Rate is as high as 12%, and as adoption increases, the yield will gradually decrease to 6%. Users can claim accumulated rewards every eight hours through the Merkl dashboard. In addition, USDD plans to launch an interest-bearing version, sUSDD, which will generate passive income directly on-chain, marking the beginning of its multi-chain expansion strategy.

Sun Yuchen enthusiastically declared on platform X: “From now on, everyone has a decentralized choice in stablecoins! USDD is on the rise! Exchange USDD and participate in mining activities with an Annual Percentage Rate of up to 12%!” This slogan highlights USDD's ambition to attract users through high returns and decentralized characteristics.

The collateralization ratio of USDD currently reaches 204.5%, mainly supported by TRX tokens. Previously, Justin Sun withdrew Bitcoin collateral worth $726 million in August, showing his reliance on TRX. Although the high collateralization ratio aims to withstand market fluctuations, the stability of USDD has been tested. During the Terra crash in 2022, the price of TRX once fell to $0.983; during the FTX crash in the same year, TRX further dropped to $0.97. These events exposed USDD's sensitivity to TRX price fluctuations.

Tether's dominance and increasing market competition

Tether (USDT), as the absolute leader in the stablecoin market, firmly holds the market throne thanks to its strong liquidity and global settlement coverage. On the TRON network alone, the daily transfer amount of USDT reaches as high as $23 billion to $25 billion, while on Ethereum, the USDT transfer amount is about $20 billion. The circulation of USDT on TRON is approximately $80 billion, while Binance controls about $44 billion in stablecoins, accounting for two-thirds of the exchange's reserves. Tether's solid position makes it a benchmark in the stablecoin market.

However, the competition in the stablecoin market is heating up rapidly. The supply of stablecoins on Ethereum has reached $165 billion, and new players are continuously emerging. MetaMask plans to launch mUSD, Paxos is issuing USDH with a revenue-sharing feature, and EURC and PYUSD are also experiencing rapid growth. In addition, the evolution of the regulatory environment is providing opportunities for newcomers. The EU's MiCA regulation and the US's GENIUS Act have opened the door for compliant stablecoins, while Asian markets (such as Singapore, Hong Kong, and Japan) are also developing clearer regulatory frameworks to attract institutional adoption.

Challenges and Future of USDD

Although USDD has improved its liquidity on Ethereum through the PSM module, its market capitalization is only between 450 million to 460 million USD, approximately 0.3% of Tether, indicating a significant scale gap. In addition, USDD's reserves are highly dependent on TRX, making it susceptible to price fluctuations, and its liquidity depth also lags behind USDT and USDC. To establish a foothold in a competitive market, USDD needs to address the following key issues:

Enhancing liquidity: Although the PSM module has improved exchange efficiency, the liquidity depth of USDD still needs to be further expanded to match the trading scale of Tether and USDC.

Diversified collateral: The current excessive reliance on TRX has increased systemic risk, and introducing a more diversified collateral portfolio will be key to ensuring long-term stability.

Embedding real economic use cases: USDD needs broader ecological integration, such as payment, DeFi protocols, or cross-border trading scenarios, to enhance its practical application value.

Conclusion

Sun Yuchen's USDD, launched on Ethereum with high-yield incentive mechanisms, demonstrates an ambition for further expansion in the stablecoin market. However, the success of USDD relies not only on technological innovation and incentive measures but also on establishing deeper liquidity, diversified collateral support, and a wide range of real-world application scenarios, particularly in the face of Tether's strong dominance and increasingly fierce market competition. In the future, whether USDD can stand out in the $2.5 trillion stablecoin market will still require time and market validation.