From the USDD (TRON’s Algorithmic Stablecoin) whitepaper:

“When 1USDD = 0.9USD, an arbitrageur can buy 1USDD with 0.9USD in the external market and then swap 1USDD for 1USD worth of TRX in the system. After that, the arbitrageur can sell 1USD worth of TRX in the external market at 1USD. In this way, the arbitrageur spends 0.9USD to get 1USD, and earns 0.1USD without taking any risks. As a result of the above arbitrage, 1USDD will be burned, and 1USD worth of TRX will be minted. As the supply of USDD decreases, USDD’s price will increase, to the point where there is no room for arbitrage and 1USDD re-equates to 1USD.”

“Upon its establishment, the TRON DAO Reserve will set its basic risk-free interest rate to 30% per annum and facilitate other decentralized and centralized organizations that accept USDD to implement consistent interest rate policies.”

To me this sounds like another UST situation, a 30% risk free interest rate is not sustainable. And once the music stops USDD will de-peg like Luna.

​

Can someone clarify what I am missing here?