Overview
dTRINITY USD (dUSD) is a decentralized and full-reserve stablecoin, backed by an on-chain reserve of other USD-denominated stablecoins and yieldcoins. Based on the ERC-20 standard, every dUSD token is backed by at least $1 of collateral and can be minted permissionlessly via smart contracts with no fees (excluding gas).
dUSD is natively issued on Fraxtal L2, with multichain expansions to Ethereum and other networks beginning in 2025. Among dTRINITY's core components, only dUSD and its external liquidity pools will be expanded beyond Fraxtal in order to prioritize strategic partnerships with other DeFi protocols.
For user instructions, please refer to 
How to Mint.
How to Mint.Collateral Reserve
Through its stablecoin and yieldcoin reserve, 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 removing 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, which generate recurring revenue to subsidize dUSD borrowers. These holdings are also optimized to ensure the reserve’s yield is similar to DeFi benchmark rates (e.g., Sky sUSDS, Aave USDC)..
The following reserve assets are currently whitelisted for minting dUSD:
Reserve Asset | Type | Network | Mint Ratio | Oracle |
✅ frxUSD | Stablecoin | ✅ Fraxtal, ⏳ Ethereum | $1 of frxUSD = 1 dUSD | |
✅ sfrxUSD | Yieldcoin | ✅ Fraxtal, ⏳ Ethereum | $1 of sfrxUSD = 1 dUSD | |
✅ DAI | Stablecoin | ✅ Fraxtal, ⏳ Ethereum | $1 of DAI = 1 dUSD | |
✅ sDAI | Yieldcoin | ✅ Fraxtal, ⏳ Ethereum | $1 of sDAI = 1 dUSD | |
✅ USDC | Stablecoin | ✅ Fraxtal, ⏳ Ethereum | $1 of USDC = 1 dUSD | |
✅ USDT | Stablecoin | ✅ Fraxtal, ⏳ Ethereum | $1 of USDT = 1 dUSD | |
⏳ USDS | Stablecoin | ⏳ Fraxtal, ⏳ Ethereum | $1 of USDS = 1 dUSD | |
⏳ sUSDS | Yieldcoin | ⏳ Fraxtal, ⏳ Ethereum | $1 of sUSDS = 1 dUSD | |
⏳ crvUSD | Stablecoin | ⏳ Fraxtal, ⏳ Ethereum | $1 of crvUSD = 1 dUSD | |
⏳ scrvUSD | Yielcoin | ⏳ Fraxtal, ⏳ Ethereum | $1 of scrvUSD = 1 dUSD | |
⏳ Others (TBD) | Stablecoin or Yieldcoin | TBD | $1 of ____ = 1 dUSD | TBD |
Reserve assets may also include LP positions in the following designated liquidity pools (via algorithmic market operations):
Reserve Asset | DEX | Type | Network |
Curve | Stablecoin/Stablecoin | ✅ Fraxtal, ⏳ Ethereum | |
⏳ dUSD/sfrxUSD LP | Curve | Stablecoin/Yieldcoin | ⏳ Fraxtal, ⏳ Ethereum |
⏳ dUSD/sDAI LP | Curve | Stablecoin/Yieldcoin | ⏳ Fraxtal, ⏳ Ethereum |
⏳ dUSD/sUSDS LP | Curve | Stablecoin/Yieldcoin | ⏳ Fraxtal, ⏳ Ethereum |
⏳ dUSD/scrvUSD LP | Curve | Stablecoin/Yieldcoin | ⏳ Fraxtal, ⏳ Ethereum |
⏳ Others (TBD) | TBD | Stablecoin/Stablecoin or Stablecoin/Yieldcoin | 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 the API3 oracle. Additional oracles, such as RedStone and Curve pools, 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, API3 price feeds for yieldcoins are based on the NAV of their underlying holdings (per unit) rather than their market-traded prices. For example, API3 provides a data feed for both sfrxUSD/frxUSD—how much frxUSD is staked per sfrxUSD—and frxUSD/USD—how much frxUSD is currently trading for. The final value of sfrxUSD is then determined by multiplying sfrxUSD/frxUSD with frxUSD/USD.
If a stablecoin feed like frxUSD/USD is trading at a premium above $1 due to temporary market liquidity issues, the mint contract will round it down to exactly $1. This prevents minting activities from posing under-collateralization risks since the stablecoin's price will likely return to $1.
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 another uncorrelated asset. Additionally, governance can temporarily or permanently suspend the minting of dUSD with the devalued asset. These measures help manage risks and protect the protocol from sudden market shocks.
Stability Mechanisms
Non-Redeemability
Mirroring the US Dollar's non-redeemability for gold reserves post-Nixon Shock (1971), dUSD is also designed to have non-redeemable reserves in order to maximize yield generation/subsidy funding. In place of redemption, dUSD relies on arbitrage from borrowers, traders, and LPs, as well as open market operations to maintain liquidity and a soft peg to $1 on DEXs.
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 US Treasuries), SMOs are designed to maintain dUSD's price stability during periods of debt expansion by contracting its supply.
When dUSD trades at a discount, only the protocol can utilize its full-reserve backing to strategically buy back and redeem dUSD from DEXs like Curve, where dUSD pools are deployed. This process contracts dUSD’s supply to stabilize the peg when it falls below $1. The SMO process also over-collateralizes the reserve with arbitrage profits since dUSD is repurchased at a discount. This typically occurs when selling pressure increases, such as when borrowers swap dUSD for other assets to leverage or loop.
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 US Treasuries for USD), AMOs are designed to maintain dUSD's price stability during periods of debt contraction by expanding its supply.
Pioneered by Frax, AMOs can automatically execute monetary policies on-chain to enhance a stablecoin’s liquidity and stability. Similarly, dUSD's AMO mechanism complements its SMOs by expanding the money supply with unbacked tokens (without under-collateralizing its reserve). When dUSD trades at a premium above $1, the protocol can supply or sell these tokens to designated dUSD pools to stabilize its peg, acquiring new reserves while over-collateralizing dUSD with arbitrage profits in the process. This enables faster responses to increased buying pressure, such as when borrowers swap other assets for dUSD to repay debt.
Learn more about the original AMO mechanism from Frax here.
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 to dLEND, borrow dUSD at $1, and sell it at a premium to arbitrage. 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 prevent liquidation risks and subsidy arbitrage from borrowers.
Market Makers (MM) Arbitrage
Like borrowers, MMs are naturally incentivized to buy dUSD when it trades at a discount to front-run the protocol's SMOs and borrowers, capturing arbitrage profits for themselves. Conversely, they can mint new dUSD at $1 per token to sell when it's trading at a premium. As MMs adds more liquidity, dUSD’s soft peg to $1 should gradually improve, decreasing its reliance on SMOs and AMOs to maintain stability.
Collateral Ratio (CR)
Over time, a portion of protocol revenue from SMO/AMO profits, dLEND's fees, and dUSD's reserve earnings may accumulate as excess reserves, pushing dUSD above a 100% collateral ratio (CR). This helps strengthen market confidence and price stability while creating a buffer against potential reserve devaluation. Once the CR exceeds a certain threshold, protocol governance can decide what to do with the excess reserves, such as funding additional subsidies.
Dynamic Interest Rebates
On a weekly basis, the protocol mints dUSD using at least 90% of new reserve earnings to subsidize interest expenses on dLEND. This newly minted dUSD is distributed pro-rata to dUSD borrowers as rebates. The Rebate APY (annual percentage yield) on dLEND shows the current rebate rate that borrowers can earn based on their outstanding dUSD debt. This rate is variable and depends on the reserve’s intrinsic yield as well as the ratio between dUSD's circulating supply (reserve-backed tokens) vs. its total debt on dLEND.
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 total value of dUSD supplied and/or borrowed on dLEND may exceed the total value of circulating dUSD (i.e., the base money supply).
Rebate APY vs. Debt Ratio (DR)
When dUSD’s total debt (D) is the same as its total circulating supply (C), the Rebate APY is the same as the reserve’s intrinsic yield (Y). When D exceeds C due to re-lending, the Rebate APY becomes diluted and decreases below Y. On the contrary, when D is less than C, the Rebate APY becomes concentrated and increases above Y. Therefore, the Debt Ratio (DR) as well as the Rebate APY will fluctuate over time and can be calculated as follows:
- DR = D / C
- Rebate APY = (Y * 90%) / DR
Below is an example of rebate calculations, assuming that Y is 10% APY:
Outstanding Debt | Circulating Supply | Debt Ratio | Rebate APY |
$50,000 | $100,000 | 0.5x | (Y * 90%) / 0.5 = 18% |
$100,000 | $100,000 | 1x | (Y * 90%) / 1 = 9% |
$200,000 | $100,000 | 2x | (Y * 90%) / 2 = 4.5% |
$500,000 | $100,000 | 5x | (Y * 90%) / 5 = 1.8% |
$1,000,000 | $100,000 | 10x | (Y * 90%) / 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 stablecoin borrowing costs on dLEND versus other unsubsidized stablecoins and 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. This makes dUSD the cheapest stablecoin to borrow in DeFi, ensuring demand and utilization.
Interest Rate Cycles
In traditional interest rate cycles, the Fed can increase (buy) government debt on its balance sheet to expand the money supply, pushing down interest rates while inflating the USD. On the other hand, the Fed can decrease (sell) its debt holdings to contract the money supply, raising interest rates while deflating the USD.
dTRINITY’s interest rate cycles are opposite to real-world cycles controlled by the Fed. The inverse dynamic stems from dLEND's market-driven rates and exogenous collateral requirements for borrowing dUSD. This is not unique to dTRINITY, either; it's also a characteristic of other DeFi lending protocols that rely on supply and demand to dynamically adjust interest rates.
Falling Interest Rates = Debt Expansion + Supply Contraction
- Low Utilization: When dUSD has less borrowing demand on dLEND, its Supply APY decreases.
- Low Rates: However, the Rebate APY increases due to less debt in the system, leading to a lower net Borrow APY.
- More Debt, Less Lenders: New borrowers take out loans while lenders may start exiting dUSD due to less yield.
- Supply Contraction: The SMO mechanism may be activated at this point, contracting dUSD’s circulating supply/reserves to stabilize its peg.
Rising Interest Rates = Debt Contraction + Supply Expansion
- High Utilization: Eventually, when dUSD has more borrowing demand on dLEND, its Supply APY increases.
- High Rates: The Rebate APY starts declining due to more debt in the system, leading to a higher net Borrow APY.
- More Lenders, Less Debt: New lenders supply dUSD to chase yield as borrowers begin buying it back to repay their loans.
- Supply Expansion: The AMO mechanism may become active at this point to expand dUSD’s circulating supply/reserves.
- Repeat Step 1 ☯️
Maintaining a consistent utilization rate for dUSD (at or above the "kink") is important for sustained growth during these expansion and contraction cycles. As such, the protocol stimulates constant demand and utilization by subsidizing dUSD borrowers, which in turn enhances the Supply APY for lenders. Lenders also receive rewards that incentivize them to continue supplying dUSD. Over time, more users seeking capital-efficiency will join the dTRINITY ecosystem to benefit from superior stablecoin rates.
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. dUSD lenders and LPs are also rewarded with governance tokens (initially as dT Points), giving them a stake in the protocol based on their liquidity contributions. This community-first approach benefits all participants and ensures the protocol's success translates directly into enhanced value for ecosystem members.
Use Case | Category | Supply | Demand | Benefits |
Lending dUSD | Buy-side supply | Liquidity | Collateral + Yield | Interest + Rewards |
Borrowing dUSD | Sell-side demand | Collateral | Liquidity | Rebates + Rewards |
LP dUSD w/ other assets | Sell-side supply /
Buy-side demand | Liquidity | Yield | Pool fees + Rewards |
For more information, please refer to Yields & Rewards.
TL;DR
If all of this is too complicated, watch this video.