Tron based Stablecoin USDD loses Bitcoin backing after withdrawing $736M worth of Token
The founder of Tron, Justin Sun, is reassuring users that they need not worry following the removal of approximately $736 million worth of bitcoin backing the USDD stablecoin on Wednesday by the Tron DAO Reserve.
With the removal of 12,000 BTC from its previously listed collateral address, the USDD stablecoin, issued by the TRON DAO Reserve, no longer has the backing of Bitcoin. USDD, an algorithmic stablecoin launched in 2022, is now being primarily backed by TRX, the Tron blockchain's native token.
An address that was formerly listed as retaining some of the collateral for USDD (USDD) had 12,000 Bitcoinsvalued at over $729 million removed from it on August 19, according to blockchain explorer Blockchair. Concerns have been expressed about the BTC being removed without the Tron DAO Reserve's approval, as some on X claim Sun was the driving force behind the change.
In a statement as seen on X on Thursday, Sun said with regard to the decentralized stablecoin USDD, its mechanisms are transparent and similar to MakerDAO's DAI. Any collateral holder may take any amount out of the vault without permission if your collateral exceeds the system-specified limit, which is typically between 120% and 150%. Collateral must be topped up if it drops below a certain level (usually less than 110%), or else liquidation may result.
Sun further explained that this forms a part of DeFi 101's basics. With a long-term collateralization rate of over 300% at the moment, USDD's capital utilization is inefficient. In order to make USDD a more competitive decentralized stablecoin on the market, the TRON DAO Reserve intends to invest time in upgrading it. Recall that Tron is also a stablecoin kingdom.
Based on data from CoinGecko, the market capitalization of USDD, which is pegged to the US dollar, is approximately $744 million as of the time of writing. As a rival to Terra's now-defunct TerraUSD (UST) token, USDD debuted in 2022. Similar to USDC and USDT, its value is intended to be fixed to the US dollar.
Despite its increased volatility, TRX—which is now the main cryptocurrency backing the USDD—remains in the top 10 when stablecoins are excluded. TRX is currently trading at $0.158 according to CoinMarketCap, and in the past year, its value has more than doubled, in part because of its usage in the developing memecoinindustry.
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