YZi Labs Invests in USD.AI and Unveils a New Approach to Stablecoins

On August 26th, YZi Labs announced a strategic investment in USD.AI, a stablecoin protocol that leverages hardware-backed financing to support AI infrastructure.

Data from Coingecko shows that the global stablecoin market cap now exceeds $283 billion. Major players like Circle and Kraken are also entering the stablecoin payment chain space.

Despite this growth, most stablecoin projects still rely on traditional models, such as pegging to the US dollar or Treasury bonds, showing limited innovation. Against this backdrop, USD.AI emerges as a distinctive challenger with a fresh approach.

USD.AI combines DePIN, RWA, and AI, creating a unique model that goes beyond simple USD pegging. By generating yield through AI hardware collateral, it addresses a gap in computing resource financing.

With the launch of its deposit channel, USD.AI has quickly gained traction, opening potential new opportunities for AI-stablecoin integration.

Team and Funding Highlights

Based on Rootdata, USD.AI was founded in 2024. One of the project’s core founders, David Choi, is also the co-founder and CEO of MetaStreer, a prominent NFT lending platform. Before that, he worked as an investment banking analyst at Deutsche Bank.

USD.AI gained significant attention thanks to its strong funding credentials.

On August 14th, the project completed a $13.4 million Series A round led by Framework Ventures.

Framework Ventures, an investment firm specializing in DeFi and infrastructure, has previously supported high-profile projects such as Uniswap and ChainLink. Their lead investment in USD.AI signals strong institutional confidence in the project’s innovative potential.

Other notable investors include the crypto venture capital firm Dragonfly, Layer 2 network leader Arbitrum, and the recently IPO-listed exchange Bullish.

The participation of these top-tier investors not only provided substantial resources but also underscored the market appeal of stablecoin projects that integrate DePIN and AI.

Following the funding announcement, USD.AI leveraged this momentum to officially launch on August 19th, generating widespread industry discussions.

How USD.AI Works: Core Mechanisms and Innovative Approach

With the rising demand for AI computing power, USD.AI combines stablecoin protocols with AI infrastructure financing to meet an underserved market need.

Many small and medium-sized AI companies own valuable GPU hardware but face challenges in securing operational funding through traditional channels.

USD.AI aims to support AI companies in hardware procurement and operations using on-chain capital, bridging the financing gap left by traditional financial systems while preserving the low-risk features of stablecoins.

The project demonstrates its innovative edge through a closed-loop system of collateral, minting, investment, and yield, integrating RWA and AI concepts in the current wave of stablecoin development.

USD.AI operates by allowing users to deposit stablecoins such as USDT or USDC as collateral to mint USDai at a 1:1 ratio. USDai is backed by US Treasury bonds and mainstream stablecoins to maintain USD parity, offering instant redemption and liquidity. It can be used for trading or providing liquidity within the DeFi ecosystem.

Users can also stake USDai to receive sUSDai tokens and participate in other DeFi projects for additional returns, enabling multiple benefits from a single investment.

User deposits are allocated to two main types of assets.

1. Loans to AI companies for GPU and hardware purchases generate attractive interest, currently showing 6.96% APY on the project website.

2. Idle funds are invested in US Treasury bonds to provide a stable base return. sUSDai holders can amplify earnings through DeFi protocols, with target APYs of 15% to 25%, while USDai holders receive low-risk, stable returns.

USD.AI’s core mechanisms ensure both innovation and stability:

• Dual Token System: USDai provides a low-risk stable option for conservative users, while sUSDai targets yield-seeking investors, offering flexibility and exposure to higher risk. This design accommodates different risk preferences while remaining compatible with the DeFi ecosystem.

• Asset Tokenization and CALIBER Framework: Using the CALIBER framework, USD.AI tokenizes physical assets such as AI hardware into on-chain assets. Legal and technical measures guarantee transparency and enforceable ownership, while on-chain insurance reduces default risk.

• QEV Redemption Mechanism: To handle the long-term and low-liquidity nature of AI infrastructure assets, USD.AI’s QEV mechanism manages sUSDai redemption requests in a market-driven way, avoiding inefficiencies from first-come-first-served approaches and ensuring fairness and stability.

• FiLo Curator Extension Mechanism: This system allows the introduction of new borrowers at scale, expanding AI infrastructure portfolios while protecting user interests through structured safeguards and risk alignment, ensuring diverse and sustainable yield sources.

In summary, USD.AI uses deposited funds to lend to AI companies requiring GPU computing power, providing transparent interest generation. Idle funds are allocated to US Treasury bonds to secure baseline returns.

Through these mechanisms, USD.AI achieves a unique competitive advantage. Compared with traditional stablecoins, it offers higher yields through AI infrastructure investments. Compared with higher-risk DeFi protocols, its risk isolation and insurance mechanisms significantly reduce systemic risk.

USD.AI not only revitalizes the stablecoin market but also delivers a scalable solution for the capital needs of the AI economy, positioning itself as a potential pioneer in the integration of stablecoins and AI infrastructure.

How to Participate and Earn Rewards

USD.AI is now accepting user deposits and allows participants to earn Allo points through its reward system by inviting others.

There are two ways for users to receive their final token rewards: through an ICO or an airdrop.

All participants join at a project valuation of $30 million in circulation, which represents 10% of the total fully diluted value (FDV) of $300 million.

Official posts state that minting or staking USDai will continuously generate points daily, and users can choose different strategies to determine their final ICO allocation or airdrop rewards.

The Allo points campaign will conclude when the year-to-date paid-out (YPO) reaches $20 million. Users opting for the ICO allocation are required to complete KYC, whereas those choosing airdrops are not.

Advanced strategies for earning Allo points are available through the introductory video linked in the official posts.

In simple terms, holding USDai is enough to participate in the ICO, while joining the airdrop requires staking USDai to receive sUSDai.

Currently, purchasing USDai or sUSDai grants qUSDai, which serves as a proof-of-deposit in the queue and automatically converts to the corresponding tokens within 24 hours.

USD.AI has a total deposit cap of $100 million. As all current funds are still in qUSDai status, the TVL currently shows only $52 million deposited during the beta testing period.

Market Perspectives and Community Reactions

Market opinions on USD.AI are currently divided.

Supporters see USD.AI as a unique and innovative stablecoin project that effectively integrates the popular AI concept. It enables users to receive both stable returns and AI-related dividends.

The project provides multiple participation strategies, allowing different types of users to find options that suit their preferences, balancing the stability expected from stablecoins with opportunities for higher-risk, higher-return choices.

Opponents, however, point out that based on available information, the team may be primarily of Chinese background, and the project appears to combine popular concepts without delivering substantial innovation.

Notably, USD.AI’s core founder David recently addressed a FUD post, clarifying that he is Korean-American and that the project is headquartered in New York. He also expressed a willingness to answer questions from Chinese-speaking users.

Overall, USD.AI presents a novel approach within the stablecoin space. Its market acceptance, however, depends on whether users are willing to "vote with their feet" and quickly reach the $100 million TVL cap.

The outcome will serve as a key indicator of the market’s reception of the emerging "AI infrastructure plus stablecoin" narrative.