USDD Bitcoin collateral was removed without a DAO vote, but Justin Sun explains this is a regular occurrence in DeFi.
On-chain data revealed that 12,000 bitcoins valued at approximately $729 million were removed from the USDD stablecoin reserve hours ago. Despite how shocking it was to various community members on X and the Tron ecosystem, Tron founder Justin Sun stated that it was not an unusual act in the DeFi sector.
USDD is an algorithmic stablecoin launched on the Tron network. The development team explained that the Tron DAO is responsible for activities involving the stablecoin.
Sun’s Involvement Rumours
Some users on X have speculated that Justin Sun was directly involved in the transaction, while others have expressed concern that the BTC stash was withdrawn without a vote from the Tron DAO reserve.
According to the governance page, the most recent and only issue presented for a community vote involved the use of burned TRON tokens in May 2023.
In a statement on X on August 22, Sun dismissed concerns, explaining that USDD operates similarly to MakerDAO’s Dai stablecoin, permitting a collateral holder to withdraw assets without needing approval as long as the collateral surpasses the system’s threshold.
The TRON founder wrote in a tweet:
“This is part of the basics of DeFi 101. Currently, USDD has a long-term collateralization rate exceeding 300%, which means that the capital utilization is not very efficient.”
Sun also noted that the mechanism of the decentralized stablecoin USDD is similar to that of MakerDAO’s DAI and is not complex.
The Bitcoin address previously listed as holding the collateral has been removed from USDD’s transparency page, indicating that Tether’s USDT and TRX are the crypto assets backing the stablecoin.
The USDD transparency page reveals that over 744 million USDD tokens are circulating. The page also shows that the stablecoin’s reserves include $1.7 billion in TRX and USDT, resulting in a collateralization ratio exceeding 230%.
This indicates that USDD holds more assets than the stablecoins it has in circulation. In contrast, DAI is collateralized at 120%, while leading stablecoins, USDT and USD Coin, maintain a 100% collateralization rate.
Sun Pledges $1B to Combat FUD
This development comes after Sun pledged $1 billion to combat and address fear, uncertainty, and doubt (FUD) in the crypto industry.
The TRON founder reassured his followers and the broader crypto community that the industry has achieved significant growth and advancements over the past year. Sun also highlighted that the current market fluctuations are not caused by negative news but rather typical aspects of market dynamics.