Another Stablecoin Loses Its Peg: USDR Drops to US $0.51

Summary

Real USD (USDR) de-pegged from the US Dollar on Wednesday, dropping by nearly 50%.
USDR was backed by real estate and generated revenue through rental income.
Although USDR holders will not lose significant amounts of money, the coin will be decommissioned following the de-pegging.

Over a year since the calamitous collapse of TerraUSD, another stablecoin has lost its peg. USDR, a yield-generating stablecoin for DeFi enthusiasts fell from parity with the US Dollar on Wednesday, dropping 50% within just a few hours. The stablecoin dropped to as low as US 51 cents (AU 79 cents) , before stabilising in the 60-cent (AU 93-cent) range.

What is USDR?

USDR is known as a “rebasing stablecoin”. Unlike other tokens tracking an underlying asset, these tokens algorithmically adjust their supply to control their prices. Another distinct component of USDR is its reserve composition. The majority of popular and reputable stablecoins – like Circle’s USDC and Tether’s USDT – are backed 1:1 by fiat currency or other dollar-denominated assets like Treasury bonds. USDR, however, is backed by a mix of tokenised real estate and Ether-based stablecoin DAI.

The idea behind backing USDR with digitised real estate was to generate constant yield through rental revenue. This way stakers could receive 5-10% APY and expose themselves to multiple financial markets – as opposed to most other yield-based stablecoins which are solely DeFi-focused. However, it appears the unique makeup of USDR has led to its (potentially temporary) demise. 

What Caused the Collapse?

At first, there was little confirmation regarding the exact cause of USDR’s de-pegging. However, Tangible – the company behind USDR – soon took to X (formerly Twitter) to outline what had gone wrong, and the immediate plan to fix it. 

As we’ve all seen, USDR has suffered a serious depeg.

Over a short period of time, all of the liquid DAI from the treasury was redeemed.

This led to an accelerated drawdown in the market cap.

Combined with the lack of DAI for redemptions, and liquidation timeline on real… pic.twitter.com/1sgRPfpIT0

— Tangible 🏠💙 (@tangibleDAO) October 11, 2023

According to Jay Clark, Tangible CEO, all of the liquid DAI held in reserve was redeemed, meaning that those staking USDR were at risk of their tokens becoming irredeemable. Panic selling ensued, causing the algorithm to destabilise and USDR to lose its peg to the US Dollar.

The team’s first reaction to the de-pegging will involve liquidating as much of the insurance fund as possible – stablecoins held in reserve to manage this exact de-pegging scenario. From there, Tangible will eventually re-open redemptions to convert USDR (Real USD) into a blend of stablecoins and other crypto tokens – at a 1:1 rate to their intended value. However, once redemptions close, USDR will be decommissioned and the token will drop to zero. 

Tangible finished off their announcement by stating: “We tried something novel with Real USD, but there were too many attack vectors in the design… We tried something new, we learned from the experience and we’ll keep building.”

We tried something novel with Real USD, but there were too many attack vectors in the design… We tried something new, we learned from the experience and we’ll keep building.

Jay Clark

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