TLDR:
- Justin Sun provides a rationale behind the shift of 12,000 BTC, previously part of the USDD collateral structure.
- Presently, USDD is predominantly underpinned by TRX and USDT tokens.
- There are raised eyebrows over USDD's governance and the extent of its decentralization.
- USDD maintains a remarkable collateralization rate, exceeding 230%.
- There are ongoing discussions regarding the transparency and the degree of influence Justin Sun holds over USDD.
Tron's originator, Justin Sun, has addressed the public's unease after around 12,000 Bitcoin, worth close to $732 million, were extracted from the USDD stablecoin's reserves by the Tron DAO Reserve.
This decision bypassed a vote from the Tron DAO Reserve, sparking debates over the stablecoin's governance model and decentralization.
USDD, introduced in 2022 to rival TerraUSD (UST), is an algorithmic stablecoin that's pegged to the dollar. With Bitcoin removed, it's now primarily reliant on Tron's TRX and Tether (USDT).
Sun argued that this strategy is akin to the MakerDAO's DAI stablecoin. He clarified that when collateral levels surpass a set threshold, usually from 120% to 150%, withdrawals can be made by holders without requiring approval.
For USDD, similar to MakerDAO's DAI, its framework is transparent. When collateral surpasses the system-defined amount (commonly ranging from 120% to 150% depending on the vault), any holder can freely retract collateral.
— H.E. Justin Sun 孙宇晨(hiring) (@justinsuntron) August 22, 2024
Sun stressed this is 'basic DeFi 101', and he referred to USDD's enduring collateralization rate of more than 300% as a driving force for the modification, hinting at inefficient capital use.
According to USDD’s transparency section, there are over 744 million USDD coins actively in circulation. The reserves include $1.7 billion in TRX and USDT, establishing a collateralization ratio above 230%.
This implies USDD's reserves hold more value than the stablecoins alive in circulation, standing favorably compared to DAI's 120% and the full backing leaderboards of USDT and USDC.
Nevertheless, the absence of a Dao vote over the Bitcoin collateral removal stirs concerns over USDD's decentralization.
Observers note despite USDD being run by a DAO, only a single proposal has been put forth for a community vote since inception. This solo vote in May 2023 was focused on utilizing burned tokens. TRX tokens in Tron governance.
The stablecoin faced prior skepticism, as Bluechip, a stablecoin rating agency, gave USDD its lowest rating, advising against its use, while questioning wallet ownership linked to its reserves.
Since launching, USDD has had its share of volatility, with a history low of $0.92 on March 11, 2023. Despite these shifts, Sun asserts the current 230% collateralization provides sufficient backing.
In addressing concerns, Sun hinted at future enhancements for USDD, revealing the Tron DAO Reserve’s intent to refine the stablecoin for market competitiveness, though specifics were left out.
