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USDD Stablecoin Faces Turmoil After Bitcoin Withdrawal

TRON's USDD loses Bitcoin backing, raising concerns over stability.

1 min 05 secAugust 23, 2024

Highlights:

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12,000 BTC removed from USDD's collateral without approval.

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Critics question governance and long-term viability of USDD.

USDD Stablecoin Faces Turmoil After Bitcoin Withdrawal

Justin Sun's USDD stablecoin has recently come under scrutiny after the TRON DAO Reserve withdrew approximately 12,000 Bitcoin, valued at around $732 million, from its collateral backing. This significant move was executed without any prior approval from the DAO, raising alarms about the decentralization claims associated with USDD.

 

 

Originally launched in 2022, USDD was designed as an algorithmic stablecoin, similar to the ill-fated TerraUSD (UST). Following the collapse of UST, USDD transitioned to a hybrid model, which included Bitcoin as part of its collateral. However, the recent withdrawal has left USDD primarily backed by TRX, the native token of the TRON blockchain, which is more volatile and less stable than Bitcoin.

 

 

Justin Sun, the founder of TRON, attempted to reassure investors by stating that the withdrawal was a standard practice within decentralized finance (DeFi) and that any collateral holder could withdraw funds without needing approval. He emphasized that USDD's collateralization rate exceeds 300%, suggesting that the stablecoin remains adequately backed despite the Bitcoin removal.

 

 However, critics have pointed out that the DAO has conducted only one vote since its inception, raising questions about its governance and operational transparency.

 

 

The incident has sparked fears reminiscent of the events leading to the UST collapse, as users worry about the integrity of USDD's backing and its long-term viability in the market. As the situation unfolds, the TRON DAO has indicated plans to upgrade USDD to enhance its competitiveness among decentralized stablecoins.

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