USDD vs UST: Is Justin Sun's New Stablecoin Just a Clone of UST?

cryptonews.com:

UST, a stablecoin that's supposed to maintain a price peg with the US dollar 1:1, spiraled out of control to reach as low as USD 0.10 this month. Following the momentous rise of UST in just a few months, only a few predicted its monumental crash, especially with the dominance stablecoins were gaining in the market.

Stablecoins have become a dominant force in the crypto markets as they enable investors to hold funds in dollars without leaving the cryptoasset markets. Decentralized finance (DeFi) is one of the major beneficiaries of stablecoins as they power most of the borrowing, lending, and liquidity provision in many DeFi protocols.

In the wake of the collapse of UST, another stablecoin backed by a prominent crypto entrepreneur, which is aiming to play the algorithmic card better than UST, has hit the market.

Read on to learn about Justin Sun’s new stablecoin, USDD, and how it looks eerily similar to the recently collapsed UST.

Before we go all-in on this new stablecoin, let's get a foundation by diving in on the concept of algorithmic stablecoins.

Stablecoins are generally defined as "digital currencies that maintain a price peg with other assets by holding them as collateral." But we already know that this definition doesn't always apply as there are different types of stablecoins. Let’s take a quick look at each one.

Fiat-collateralized stablecoins are backed by fiat currency held in reserves by a central entity. They often come under criticism by crypto enthusiasts for their centralization and lack of transparency as their reserves are off-chain.

Commodity-collateralized stablecoins are backed by physical assets like oil, precious metals, real estate, etc. through a central entity. They face the same criticism as fiat