Overview
dTRINITY USD (dUSD) is a decentralized and fully-backed stablecoin, collateralized by a non-custodial reserve of USD-denominated stablecoins and yieldcoins. Built on the ERC-20 standard, each dUSD token is soft pegged to $1—backed by at least $1 worth of collateral. dUSD can be minted permissionlessly via smart contracts with no fees (excluding gas). A fee-based redemption mechanism is currently in development and will be enabled permanently in Q2 ‘25.
dUSD is currently deployed natively on Fraxtal L2 and Sonic, with upcoming expansion to Ethereum and other networks. To isolate chain-specific risks and mitigate cross-chain contagion, dUSD reserves are segregated by chain. This means each dUSD deployment maintains its own independent reserve to back the circulating supply on that network. As a result, dUSD tokens are designed to be non-fungible across chains (e.g., Fraxtal dUSD ≠ Sonic dUSD). To move funds between integrated networks, cross-chain swaps for non-fungible dUSD variants will be facilitated via CrossCurve.
For issuance instructions, please refer to 
How to Mint.
How to Mint.Collateral Reserves
Through its stablecoin and yieldcoin reserves, dUSD is able to maintain independence from the traditional banking system while providing on-chain transparency and price stability. The protocol selects each reserve asset strategically based on its quality, track record, yield, and risk profile. As dTRINITY evolves, governance will evaluate opportunities to diversify the reserve with new assets or remove those that no longer meet the protocol's standards.
dTRINITY has a mandate to allocate at least 90% of dUSD's reserve holdings in yieldcoins to generate subsidy funding. These holdings are also optimized to target DeFi benchmark rates (e.g., Sky sUSDS, Aave aUSDC), ensuring the protocol doesn't over/under-incentivize its users.
The following reserve assets are currently whitelisted for minting dUSD:
Reserve Asset | Type | Network | Mint & Redeem Ratio |
☑️ frxUSD | Stablecoin | ☑️ Fraxtal, Sonic
⏳ Ethereum | $1 of frxUSD = 1 dUSD |
☑️ sfrxUSD | Yieldcoin | ☑️ Fraxtal, Sonic
⏳ Ethereum | $1 of sfrxUSD = 1 dUSD |
☑️ DAI | Stablecoin | ☑️ Fraxtal | $1 of DAI = 1 dUSD |
☑️ sDAI | Yieldcoin | ☑️ Fraxtal | $1 of sDAI = 1 dUSD |
☑️ USDC | Stablecoin | ☑️ Fraxtal, Sonic
⏳ Ethereum | $1 of USDC = 1 dUSD |
☑️ USDT | Stablecoin | ☑️ Fraxtal
⏳ Ethereum | $1 of USDT = 1 dUSD |
☑️ scUSD | Stablecoin | ☑️ Sonic | $1 of crvUSD = 1 dUSD |
☑️ wstkscUSD | Yielcoin | ☑️ Sonic | $1 of scrvUSD = 1 dUSD |
⏳ USDS | Stablecoin | ⏳ Ethereum | $1 of USDS = 1 dUSD |
⏳ sUSDS | Yieldcoin | ⏳ Ethereum | $1 of sUSDS = 1 dUSD |
⏳ Others (TBD) | Stablecoin or Yieldcoin | TBD | $1 of ____ = 1 dUSD |
Reserve assets may also include LP positions in the following designated liquidity pools (via algorithmic market operations):
Reserve Asset | Type | DEX | Network |
Stablecoin/Stablecoin | Curve | ☑️ Fraxtal, ⏳ Ethereum | |
Stablecoin/Yieldcoin | Curve | ☑️ Fraxtal, ⏳ Ethereum | |
⏳ Others (TBD) | Stablecoin/Stablecoin
Stablecoin/Yieldcoin | TBD | TBD |
Price Oracles
The dUSD reserve's NAV (net asset value) and mint ratio per reserve asset are determined based on each asset's USD price feed via oracles like API3, RedStone, and Chainlink. More oracles will be incorporated in the future to add redundancy and enhance the reliability of price feeds.
To protect against de-pegging events caused by temporary market liquidity issues, oracle price feeds for yieldcoins are based on the unit NAV of their underlying holdings rather than market-traded prices. For example, API3 provides a feed for sfrxUSD/frxUSD (how much frxUSD is staked per sfrxUSD) and frxUSD/USD (how much frxUSD is trading for). The final value of sfrxUSD is then determined by multiplying sfrxUSD/frxUSD with frxUSD/USD.
If a stablecoin feed like frxUSD/USD trades at a premium above $1, the dUSD minting contract will round it down to exactly $1. This prevents minting activities from posing under-collateralization risks due to temporary market liquidity issues.
Conversely, if a reserve asset devalues significantly and does not recover within a 24-hour period, governance can assess the situation and take action to de-risk the reserve by swapping the devalued asset out for an uncorrelated asset. Additionally, governance can temporarily or permanently suspend minting with the devalued asset. These measures help the protocol manage risks and mitigate impacts from sudden market shocks.
Stability Mechanisms
Stability Market Operations (SMO)
SMOs are akin to the Fed’s open market purchases of financial assets. However, unlike the Fed's approach of expanding the money supply through debt issuance (i.e., printing USD to buy bonds), SMOs are designed to maintain dUSD's price stability during credit expansion cycles by contracting its reserve and circulating supply.
When dUSD trades below $1, the protocol uses its full-reserve backing to strategically buy back and redeem dUSD from DEX pools. This stabilizes the peg and strengthens the reserve through arbitrage profits from buying dUSD at a discount. SMOs typically take place during periods of high selling pressure—for example, when borrowers swap dUSD for other assets to loop or increase leverage.
Algorithmic Market Operations (AMO)
AMOs are akin to the Fed’s open market sales of financial assets. However, unlike the Fed’s approach of contracting the money supply through debt reduction (i.e., selling balance sheet assets for USD), AMOs are designed to maintain dUSD's price stability during credit contraction cycles by expanding its reserves and circulating supply.
Pioneered by Frax, the AMO mechanism can automatically execute monetary policies on-chain to enhance a stablecoin’s liquidity and price stability. Similarly, dUSD's AMOs complement its SMOs by expanding the money supply with pre-minted tokens (without under-collateralizing its reserve). When dUSD trades at a premium above $1, the protocol can supply or sell these unallocated tokens to designated dUSD pools. This stabilizes the peg and strengthens the reserve through arbitrage profits from selling dUSD at a premium. AMOs enable faster protocol response to increased dUSD buying pressure on DEXs, such as when borrowers unloop or deleverage.
Borrowers Arbitrage
When dUSD trades below $1, existing borrowers have a natural incentive to buy it back at a discount and repay their debt on dLEND at face value. Conversely, when dUSD trades above $1, borrowers can supply collateral in dLEND or partnered lending protocols, borrow dUSD at $1, and sell it at a premium to capture arbitrage profits. These processes also help reinforce dUSD's soft peg to $1.
Note: The price of dUSD is hard-coded to $1 on dLEND. Additionally, dUSD is disabled as a borrowing collateral on dLEND by default to mitigate subsidy arbitrage from loopers.
Market Makers (MM) Arbitrage
Like borrowers, MMs are naturally incentivized to buy dUSD when it trades at a discount to front-run SMOs/borrowers and capture arbitrage profits for themselves. Conversely, they can mint new dUSD tokens at par to sell when it's trading at a premium. As MMs add more liquidity, dUSD’s soft peg to $1 would gradually improve, decreasing its reliance on SMOs and AMOs to maintain stability.
Increasing Collateral Ratio (CR)
Over time, a portion of protocol revenue—from SMO/AMO profits and dUSD's reserve earnings—accumulates as excess reserves, pushing dUSD above a 100% CR. This helps strengthen dUSD’s market confidence and price stability while creating a buffer against potential reserve devaluation. When the CR exceeds a certain threshold, protocol governance can determine how to allocate the excess reserves, such as funding extra subsidies or acquiring BTC and ETH as strategic reserve assets.
Dynamic Interest Rebates
The protocol mints new dUSD periodically using at least 90% of reserve earnings during that period to subsidize dUSD interest expenses on lending protocols. These freshly minted tokens are distributed to dUSD borrowers as interest rebates. The Rebate APY shows the current rebate rate that borrowers can earn based on their active dUSD debt. This rate is variable and depends on the reserve’s intrinsic yield as well as the ratio between dUSD's reserve TVL vs. its TDL (Total Debt Locked).
Recursive Lending (Re-Lending)
When borrowers exchange dUSD for other assets, it flows into liquidity pools where other users may acquire and re-lend it. Users may also borrow dUSD and re-lend it to take advantage of carry trade opportunities when dUSD’s Supply APY is higher than its Borrow APY (net of rebates). As dUSD gets re-lent multiple times, it creates a money supply and debt multiplier effect similar to the traditional banking system. This means the aggregate value of dUSD deposits and debt on lending protocols may exceed the total circulating supply (i.e., the base money supply).
Rebate APY vs. Debt Ratio (DR)
When dUSD’s TDL is the same as its total circulating supply (CS), the Rebate APY is the same as the reserve’s intrinsic yield (IY). When TDL exceeds CS due to re-lending, the Rebate APY becomes diluted and decreases below IY. On the contrary, when TDL is less than CS, the Rebate APY becomes concentrated and increases above IY. Therefore, the Debt Ratio (DR) as well as the Rebate APY will fluctuate over time and can be calculated as follows:
- Rebate APY = (IY * 90%) / DR
- DR = TDL / CS
Below is an example of rebate calculations, assuming that IY is 10% APY:
Total Debt Locked | Circulating Supply | Debt Ratio | Rebate APY |
$50,000 | $100,000 | 0.5 | 18% |
$100,000 | $100,000 | 1 | 9% |
$200,000 | $100,000 | 2 | 4.5% |
$500,000 | $100,000 | 5 | 1.8% |
$1,000,000 | $100,000 | 10 | 0.9% |
Since there are always yield-bearing reserves backing dUSD, even as the DR increases, the Rebate APY is always above zero. In other words, interest rebates lower the effective equilibrium of dUSD borrowing costs versus unsubsidized stablecoins on lending protocols. When the DR and utilization are high, this cost difference may be marginal, but when they are low, the delta can become quite substantial, potentially producing negative borrowing rates (i.e., getting paid to borrow, net of rebates). This makes dUSD a super cost-effective debt instrument, ensuring constant credit demand and utilization on integrated lending protocols.
User Benefits
Unlike major centralized stablecoins (e.g., USDC, USDT) that internalize their reserve earnings, dUSD externalizes these earnings with the dTRINITY community through borrowing subsidies. On top of lending yields and pool earnings, dUSD lenders and LPs are also rewarded with 
TRIN tokens (initially through the 
Points Program), giving them a stake in the protocol based on their liquidity contribution. This community-first approach benefits all market participants and ensures the protocol's success translates directly into enhanced value for ecosystem members.
TRIN tokens (initially through the Points Program), giving them a stake in the protocol based on their liquidity contribution. This community-first approach benefits all market participants and ensures the protocol's success translates directly into enhanced value for ecosystem members.For more information, please refer to Yields & Rewards.