Justin Sun’s USDD stablecoin is no longer backed by Bitcoin.

adminAugust 22, 2024

Tron founder Justin Sun assured users on Wednesday that there was nothing to worry about after the Tron DAO Reserve removed about $750 million worth of Bitcoin backing the USDD stablecoin. Launched in 2022 as a competitor to Terra’s defunct UST token, the algorithmic stablecoin is now primarily backed by Tron’s native token. Trex

+1.22%
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Sun said that USDD is not capital efficient as it has a “long-term collateralization ratio exceeding 300%,” and explained why the TRON DAO Reserve, the group that oversees USDD’s collateral, withdrew around 12,000. Bitcoin

-1.20%
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“As for the decentralized stablecoin USDD, its mechanism is similar to MakerDAO’s DAI and is not mysterious. Once the collateral exceeds the amount specified by the system (usually 120%-150% depending on the vault), any collateral holder can freely withdraw the amount they want without anyone’s approval,” Sun said. message On social media platform X

The recent shift in strategy rekindles longstanding questions and concerns surrounding algorithmic stablecoins, particularly around decentralization and Sun’s influence. USDD, launched in 2022, is supposed to be managed by a DAO, but decisions about stablecoins are rarely put to a community vote.

User X noticed that the announcement about USDD collateral came from Justin Sun’s personal account, not the Tron DAO Reserve. Also, so far, DAO members have only voted on one question: whether to use the TRX tokens that will be burned in May 2023.

Last year, a blue chip calling itself the “Moody’s of stablecoins” US dollar It ranked as the lowest stablecoin stability, and was specifically criticized for its heavy reliance on TRX and lack of transparency. “USDD has no governance system. USDD holders have no legal or code-based protections and are at the mercy of the Tron DAO Reserve,” the report said.

With approximately $744 million USDD tokens in circulation, it is the 7th largest stablecoin and one of the top 100 cryptocurrencies by market cap. It holds $1.7 billion worth of TRX and USDT tokens, giving it a collateralization ratio of over 230%, meaning it has more than twice as many assets as stablecoins in circulation.

However, Bluechip estimated that USDD’s collateralization is only 53%, as Huobi, a cryptocurrency exchange backed by Justin Sun, also claims to control USDD. address This is where the previous Bitcoin reserves of USDD were stored. The report noted that the vast majority of USDD reserves were stored in multi-signatures rather than USDD smart contracts, making it easy to move the assets.

According to The Block’s pricing page, TRX, the 10th largest cryptocurrency, has a market cap of over $13 billion. Frequently Asked Questions In a post published in 2022, USDD’s DAO wrote, “TRX price fluctuations have no real correlation with USDD price stability, so all USDD holders are advised to be rational and not be fooled by market rumors.”

A Tron representative did not respond to a request for comment.

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adminAugust 22, 2024