Tron DAO Decreases USDD's Bitcoin Collateral by $732 million

user avatar

by Giorgi Kostiuk

2 years ago

Made with AI

  1. Understanding Collateralization Rates
  2. Sun's Reassurances on USDD's Stability
  3. Shift in USDD’s Collateral Composition


    4. On Wednesday, the Tron DAO Reserve, which oversees the USDD stablecoin, removed 12,000 Bitcoin worth $732 million from its collateral backing. This move has led to concerns about the stability and decentralization of USDD.

    Understanding Collateralization Rates

    Collateralization rate is a measure of the value of assets backing a stablecoin relative to its issuance. Justin Sun, founder of Tron, explained that despite the recent Bitcoin withdrawal, USDD remains well-collateralized. According to USDD’s transparency page, the current collateralization ratio stands at approximately 230%. Sun compared USDD’s mechanisms to MakerDAO’s DAI, highlighting that the system allows for the free withdrawal of collateral when it exceeds the required amount, and necessitates additional collateral or liquidation if it falls below a certain threshold.

    Sun's Reassurances on USDD's Stability

    Sun acknowledged that the capital utilization of USDD is not highly efficient but emphasized that the long-term collateralization rate is robust. He stated: "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 Tron DAO Reserve plans to upgrade USDD to enhance its competitiveness in the decentralized stablecoin market.

    Currently, USDD has a long-term collateralization rate exceeding 300%, which means that the capital utilization is not very efficient.Justin Sun

    Shift in USDD's Collateral Composition

    The recent removal of Bitcoin from USDD’s collateral has altered the composition of its backing assets. The stablecoin is now primarily supported by Tether (USDT) and TRX. The transparency page of USDD shows that it holds $1.7 billion worth of TRX and USDT, providing a collateralization ratio of over 230%. This new backing structure contrasts with other stablecoins in the market, such as DAI, which is collateralized at around 120%, while major players like USDT and USDC maintain a 100% collateralization ratio.

    USDD’s journey has been bumpy. Initially, it was undercollateralized, meaning its backing assets were less than the total USDD in circulation. Following the collapse of the TerraUSD stablecoin in 2022, USDD transitioned to an overcollateralized model to enhance stability. Despite the Tron DAO’s management efforts, critics argue that significant changes, such as the Bitcoin withdrawal, have occurred without apparent community approval.

Tier I

Sector: #18291

Sealed Hiding Place Room

Resource Cache

Resource Cache

Tier I

Requires 25% Tier Progress to Claim
Meme Cache

Meme Cache

Tier I

Requires 50% Tier Progress to Claim
Equipment Cache

Equipment Cache

Tier I

Requires 75% Tier Progress to Claim

After collecting, hiding places will be stored in your inventory and can be opened with Keys.

Other news

Hut 8 Wins Bid for Poolin's Texas Datacenter Sites

Hut 8 has successfully bid $140 million for two datacenter sites owned by the bankrupt mining company Poolin.

user avatarLucas Weissmann

Senate Banking Committee Democrats Request Hearing on Prediction Markets

Democratic members of the Senate Banking Committee request a public hearing to examine the growing issue of prediction markets and their regulatory implications.

user avatarFilippo Romano

Crypto Economic Activity Remains Strong Despite Market Downturn

Crypto economic activity has shown resilience despite a significant drop in market capitalization, indicating a shift in market dynamics.

user avatarEmily Carter

Visa's Research Highlights Trust as a Barrier to Stablecoin Adoption

Visa's research highlights that trust and fraud protection are essential for stablecoin adoption, with 36% of US respondents considering their use, especially with bank-level protections.

user avatarTomas Novak

Cardano's Onchain Governance Approves New Treasury Allocations

Cardano's governance system has approved a new round of treasury allocations aimed at infrastructure and ecosystem development.

user avatarKaterina Papadopoulou

Galaxy Invests $100 Million in Onchain Credit Infrastructure

Galaxy has invested $100 million in Sky Protocol's yield-bearing sUSDS, integrating it into its corporate treasury and allowing it as collateral for institutional trading.

user avatarMaya Lundqvist

Important disclaimer: The information presented on the Dapp.Expert portal is intended solely for informational purposes and does not constitute an investment recommendation or a guide to action in the field of cryptocurrencies. The Dapp.Expert team is not responsible for any potential losses or missed profits associated with the use of materials published on the site. Before making investment decisions in cryptocurrencies, we recommend consulting a qualified financial advisor.