This year has seen a series of shifts in the global macroeconomic landscape coupled with evolving regulatory frameworks for virtual assets. Amidst this backdrop, the crypto world continues to evolve by offering new products that cater to the needs of users and the community. That’s where Real World Asset (RWA) tokenization came in as a new frontier and value capture channel within the crypto market.
As this wave gains momentum, native crypto DeFi protocols like MakerDAO and Aave are actively making moves to embrace RWA. The TRON ecosystem has recently introduced its first RWA product stUSDT, which is the “Web3 version of Yu’e Bao.” (Note: Yu’e Bao is the largest money market fund in China.) Subsequently, stUSDT garnered a robust partnership with Huobi Earn, aiming to offer users a more stable and higher-yield money market product.
After observing their performance over the past few weeks, the question on everyone’s mind is whether stUSDT and similar products are truly worthwhile?
Is stUSDT a safer choice?
According to stusdt.io, stUSDT is the first rebasing RWA protocol on the TRON network. Users receive stUSDT as a receipt token upon staking USDT on the platform. It runs on the decentralized platform JustLend DAO.
The process involves staking USDT, which then enables the minting of stUSDT tokens at a 1:1 ratio. Notably, these stUSDT tokens are pegged to real-world assets. Their associated smart contracts, known as stUSDT-RWA, distribute rewards to token holders via a rebase mechanism.
stUSDT boasts heightened security compared to other crypto assets as it’s tied to prime real-world assets such as short-term government bonds.
Both stUSDT and USDT are pegged to the US dollar but there is a major difference. USDT’s backing is based on a reserve of real-world assets while stUSDT is tied directly to short-term government bond investments. If anything, stUSDT appears less prone to default risks unless there is the extreme scenario of a national insolvency.
What about the returns for stUSDT?
In terms of returns for stUSDT, Tron Founder Justin Sun shared in a recent interview that stUSDT is highly composable like a Lego brick within various DeFi lending, yield farming, and futures protocols, as well as being tradable on exchanges. stUSDT will potentially become the foundation mechanism for $50 billion assets on the entire TRON blockchain to generate rewards, which is crucial for the entire DeFi ecosystem. Leading the way is Huobi Earn, which is the first mover that could take the big step of transitioning USDT assets forward into RWA-like assets.
According to reports in June, it was revealed that Huobi initiated collaboration with RWA platform stUSDT, which predominantly targets stable bond assets and offers 4%-5% APYs. The recent highlight from Huobi Earn is the USDT product with 5% APY, which comprises 4.25% from stUSDT platform’s bond earnings and an additional 0.75% bonus from Huobi.
The yields users earn on subscribing to Huobi Earn products stem from investments in stable assets such as margins, loans, and bonds, as well as from staking rewards based on the Proof of Stake (PoS) mechanism and platform incentives. Compared to scenarios where similar crypto products couldn’t display their on-chain investment details, stUSDT significantly enhances fund transparency. More importantly, users can convert stUSDT back to USDT at any time in terms of withdrawals.
On August 11, 2023, Huobi announced the latest Merkle tree asset proof data. From the official announcement, the specific reserve ratios shown in this update are as follows: 102% for USDT (Huobi wallet balance: 662,404,586 USDT), 101% for BTC (Huobi wallet balance: 25,410 BTC), 104% for ETH (Huobi wallet balance: 139,523 ETH), 103% for HT (Huobi wallet balance: 191,815,856 HT), and 103% for TRX (Huobi wallet balance: 9,702,620,024 TRX). The data for USDT and ETH already includes stUSDT and stETH.
Huobi claims it will regularly conduct Proof of Reserve audits to ensure users that their assets are safeguarded. Besides, users can also query this data through platforms like Nansen and Defillama.
In conclusion, RWA assets exemplified by stUSDT, are featured with advantages including tokenization of assets, on-chain liquidity, elimination of traditional financial barriers for premium investment opportunities, and transparency through smart contracts. In the future, they will become an integral part of the stablecoin asset-liability structure.