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(Image credit: Crypto Farm) USD.AI is a new decentralized finance (DeFi) protocol that connects crypto investors to real-world Nvidia AI GPUs that earn money by renting out compute power to AI developers. According to CoinDesk , DeFi has many stablecoins backed by Treasury earnings, while many smaller AI players are struggling to raise capital to acquire GPUs for compute. USD.AI aims to bridge these two markets by allowing stablecoin holders to lend their holdings to the protocol, which then uses them to purchase AI GPUs. These are then rented to AI developers, with the proceeds from those rentals servicing the debt and providing yield to the original lenders.
This model delivers investors a much higher return than Treasury rates while giving startups easier access to AI GPUs. Although this also means a higher risk for those investing their stablecoin into the protocol, USD.AI is taking steps to reduce volatility. The protocol uses a three-tiered structure to help keep it safe: CALIBER, FiLO, and QEV. The first mechanism tokenizes each particular GPU as an NFT. These GPUs are installed at an insured data center and legally documented, ensuring enforceable claims and physical custody of the asset. Loans are then issued against the NFT to fund the equipment, turning the token into collateral.
The next mechanism, FiLo, is managed by risk curators who underwrite the loans with their own funds. These are called first-loss capital and would cover any losses if a GPU borrower defaulted, serving as a buffer for lenders. These curators would also have the power to choose who to lend out the GPUs to, so there’s no single authority that can pick and choose borrowers. But because curators only make money when the loan is repaid, it helps ensure that their values are closely aligned with both the protocol and the lender.
Nvidia reportedly signs another blockbuster AI supply deal, this time with Elon Musk's xAI
OpenAI may lease Nvidia GPUs instead of buying them
Key considerations
- Investor positioning can change fast
- Volatility remains possible near catalysts
- Macro rates and liquidity can dominate flows
Reference reading
- https://www.tomshardware.com/tech-industry/cryptocurrency/SPONSORED_LINK_URL
- https://www.tomshardware.com/tech-industry/cryptocurrency/new-stablecoin-connects-crypto-investors-to-real-world-nvidia-ai-gpus-that-earn-money-by-renting-out-compute-power-to-ai-devs-usd-ai-lets-crypto-investors-make-bank-off-ai-compute-rentals#main
- https://www.tomshardware.com
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Informational only. No financial advice. Do your own research.