This article is sponsored by RWA DAO.
Since its rise to popularity in 2020, Decentralized Finance (DeFi) has redefined financial interactions in crypto by eliminating intermediaries, enabling greater transparency, and increasing accessibility to more users. While DeFi has often been seen as a permissionless alternative to the traditional financial system, the recent attention towards Real World Assets (RWAs) has proven that DeFi and TradFi can collaborate in certain areas to benefit both traditional institutions and crypto natives. RWAs, when integrated on-chain, represent a significant step in combining the tangible assets of the real world with the transparency and innovation of DeFi.
As the market cap of tokenized treasuries surged by 585% to $666Mn worth of tokens issued thus far in 2023, it’s clear that more protocols are starting to get involved with tokenized bonds, securities and private credit. TRON has also heralded its entry into the RWA realm with stUSDT. It is not like other liquid staking products but instead seeks to bridge the gap between tangible assets and the benefits of blockchain technology, aspiring to become the crypto analog to Alipay’s Yu’e Bao, China’s largest money market fund.
In this article, we’ll put stUSDT under the lens to learn more about what crypto users can do with stUSDT and how it fits within the TRON ecosystem and the broader crypto market.
What is stUSDT?
Deployed on TRON and Ethereum, stUSDT, or staked USDT, is a TRC-20 / ERC-20 receipt token that users receive when they deposit USDT into the stUSDT-RWA contract address on either network. Upon deposit, the funds will be used to invest in various RWAs, allowing users to gain exposure to yields from these assets. To maintain stability and trust in the system, unstaked stUSDT can always be redeemed for USDT at a 1:1 ratio, which is enforced by the stUSDT-RWA Contract, although certain restrictions may apply such as the amount of liquidity remaining in the contract.
Staking rewards are distributed in the form of stUSDT through a daily rebase. However, the rebase mechanism makes it difficult to integrate stUSDT with most DeFi protocols; as such, there is also a wrapped version of stUSDT, known as wstUSDT. While a holder’s stUSDT balance increases as it receives daily rebase rewards, wstUSDT accrues the underlying stUSDT rewards and will constantly increase in value beyond 1 stUSDT. The static nature of wstUSDT means that they can be used as collateral, or provided as liquidity on DeFi protocols that rely on stable-balance tokens, like lending platforms and DEXs. Users can freely wrap their stUSDT anytime using the current exchange rate of stUSDT:wstUSDT, or redeem their wstUSDT to receive their initial stUSDT and the underlying rewards.
stUSDT claims to focus on high-quality prime investments such as short-term government bonds and regularly tracks their performance. Through diversification across multiple real-world asset classes, crypto users are able to gain access to a larger but also better selection of RWAs.
In line with the principles of transparency and accountability, users will also be able to keep an eye on the flow of deposits and daily yield accrued on each network. Asset allocation decisions are governed by the RWA DAO with an oversight mechanism, ensuring user assets are properly allocated via optimal strategies.
By converting RWAs into a tokenized product, stUSDT provides the same level of utility and flexibility as other conventional crypto assets, allowing for seamless transfers and access that are untethered by traditional market restrictions. Moreover, with the added benefit of TRON’s low transaction costs, users can stake their stUSDT at a more affordable rate.
Emergence of stUSDT
The launch of stUSDT on July 3, 2023, has played a significant role in growing the Total Value Locked (TVL) of the TRON network over the past 2 quarters, increasing by an additional 26% from $5.9Bn in July to $8.0Bn in December, according to DefiLlama. The total value of stUSDT issued on TRON has also multiplied by 104x from an initial $22Mn to $2.3Bn in December, making up just over 28% of assets on the network.
Source: DeFiLlama
Through its current integration with TRON’s native lending platform, JustLend, users are also able to lend and borrow wstUSDT, allowing for more complex RWA strategies that would otherwise be unfeasible in traditional finance. By leveraging the composable nature of DeFi with sophisticated real-world financial products, stUSDT has essentially enabled a more comprehensive financial ecosystem on TRON, where users have equal opportunity to seek the best returns from both DeFi and TradFi.
The Benefits of stUSDT
By merging the immutable and permissionless aspects of blockchain technology with tangible financial products, stUSDT’s tokenization of RWAs comes with several additional benefits that promote greater accessibility and transparency to crypto users and institutional investors.
Real-World Asset Integration in the Crypto Space
For the most part, the DeFi landscape has largely operated in its bubble, where new primitives and protocols are built on top of existing crypto assets rather than traditional assets. Although tokenized gold and other asset-backed products made their way into DeFi all the way back in 2019, seldom have they been properly integrated to accommodate more complex use cases.
In 2023, the current yield-starved environment of DeFi, as well as rising interest rates in the real world, has not only fostered the resurgence of RWAs such as stUSDT but also the infrastructure to support the growth of this segment. From its integration with JustLend to potential partnerships with other RWA-specific platforms, stUSDT can be utilized in ways that would normally be inaccessible to retail participants in traditional markets.
Financial Democratization: Bridging Investors and RWAs
For the average investor, access to alternative asset classes has often been limited due to minimum wealth requirements. By tokenizing an underlying pool of RWAs, assets that would normally cost millions of dollars can be fractionalized into smaller pieces, allowing retail investors to invest as little or as much as they want for a share of the underlying pool of assets.
Transparency
One of the standout features of the blockchain and, by extension, DeFi platforms is transparency, where any transaction or modifications made to a smart contract are recorded and can be audited. stUSDT also boasts the same level of transparency with added security mechanisms in place, such as the RWA Vault contract and periodic disclosures by Asset Managers.
TRON's Framework: An Edge in the DeFi World
The TRON network offers several advantages to accommodate a thriving DeFi ecosystem, such as cost-effective transactions, operational efficiency, and scalability, providing stUSDT with a unique edge. As stUSDT deploys natively on the TRON network, users can enjoy swift transactions and reduced costs in interacting with RWAs. More so, with TRON's global reach, active user base, and community support, stUSDT can tap into a vast network of potential users, further enhancing its position in the DeFi landscape.
stUSDT’s Role
The Global Reach and Impact of stUSDT
Starting from Asia, stUSDT’s TVL has grown exponentially, marking its presence in Europe, South America, and Africa. By partnering with other crypto platforms such as JustLend, HTX, and Poloniex, stUSDT has been woven into an active network where it can be accessed and utilized internationally. Taking inspiration from Alipay’s Yu’e Bao for its user-friendly design, stUSDT is also taking steps to integrate with traditional finance platforms, making it more familiar and relatable to non-crypto users.
Democratizing Access to RWAs
stUSDT has leveled the playing field between institutional and retail participants by lowering barriers of entry. The properties of TRC-20 and ERC-20 tokens offer users the flexibility to quickly transfer, allocate, and manage their stUSDT.
stUSDT aims to maintain a more inclusive portfolio containing various real-world asset classes, and the stUSDT user interface also serves as a platform that educates users about RWAs, ensuring they are well-informed before making any decisions.
Conclusion
The launch of stUSDT represents a significant stride towards a more intertwined relationship between the traditional financial world and decentralized finance. As the TRON network makes headway with real-world asset tokenization, it will transform how we view and interact with digital assets. stUSDT not only bridges traditional markets and blockchain ecosystems but also brings liquidity, transparency, and democratization to real-world assets that may have previously been inaccessible to a majority of users.
Through close collaborations between entities like RWA DAO and JustLend DAO, stUSDT doesn’t just offer exposure to off-chain yields but has become an important building block that can be integrated and built on within the TRON ecosystem. By leveraging the security, immutability, and transparency of the blockchain, stUSDT could potentially reshape the DeFi landscape of TRON and many other networks.
In an ever-evolving space where TradFi and DeFi often seem at odds, stUSDT is one of many pioneers that are striving to not only create a product that combines the best of both worlds, but also catalyzes the next phase of growth in the blockchain industry.
CoinGecko's editorial team comprises writers, editors, research analysts and cryptocurrency industry experts. We produce and update our articles regularly to provide the most complete, accurate and helpful information on all things cryptocurrencies. Follow the author on Twitter @coingecko
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