With the Bitcoin withdrawal, USDD is now backed 98.9% by Tron’s native token, TRX, and USDT, worth $19 million.
Cardano founder Charles Hoskinson has weighed in on the developing USDD saga in the Tron ecosystem. Hoskinson appeared disappointed with Justin Sun’s move, dropping a GIF in a tweet on Thursday that passed on the expression.
https://t.co/jRIkAsSmdb pic.twitter.com/BUBpY9iU2H
— Charles Hoskinson (@IOHK_Charles) August 22, 2024
The IOHK founder’s disapproval was seen in a quoted retweet from Bitcoin News stating that Tron Network’s founder Justin Sun was defending his latest move. The news made the rounds late Thursday that Tron’s native stablecoin, USSD, was no longer backed by Bitcoin.
What Went Down
Sources reported that USDD secretly lost its Bitcoin backing after 12,000 BTC ($726 million) was withdrawn from the stablecoin’s collateral reserve. This meant that the algorithmic stablecoin was now majorly backed by Tron’s native token, TRX.
What caught the attention of Hoskinson and other key players in the crypto sector was how the withdrawal was made. The TRON DAO Reserve is the issuer of USDD, and as an autonomous governance system, any major decision regarding the blockchain ought to be made by a community vote.
However, the 12,000 BTC was moved from the algorithmic stablecoin without a community vote or public awareness, bringing into question the decentralized nature of the TRON DAO. Notably, the only decision put to the vote by the TRON DAO was a May 2023 decision on whether to use TRX from USDD’s TRX burning contract.
Sun Reassures Community
Amidst the chaos, Sun took to X to reassure USDD users and the Tron community that everything was under control. He said the move was not mysterious and likened USDD to DAI, a stablecoin from MakerDAO.
Regarding the decentralized stablecoin USDD, its mechanism is similar to MakerDAO’s DAI and is not mysterious. When your collateral exceeds the amount specified by the system (usually between 120%-150% depending on the vault), any collateral holder can withdraw any amount freely…
— H.E. Justin Sun 孙宇晨(hiring) (@justinsuntron) August 22, 2024
Sun stated that USDD’s collateral reached 300%, exceeding the threshold of 120% to 150%. Hence, any collateral holder could pull funds from the stablecoin’s reserves without authorization. According to him, this was the “basics of DeFi 101.”
Furthermore, the Tron founder stated that the TRON DAO Reserve was planning to upgrade the algorithmic stablecoin to make it more competitive. USDD was launched in 2022 to compete with Terra’s now-depegged UST stablecoin.
Notably, USDD currently has a total supply of $744,337,556 and stands at 82 in the crypto market cap rankings. With the Bitcoin withdrawal, USDD’s collateral ratio has dropped to 229%.
USDD’s collateral value is $1,706,624,789, with a staggering 98.9% backed by 10,929,607,339 TRX and $19 million USDT. The stablecoin’s collateral reserve was at $2.2 billion in 2022.
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