USDf's recent drop below $0.995 has raised many questions about its reserve backing and minting structure. Despite claims of 117% coverage, real risks remain high.
Overview of USDf's Decline
The USDf stablecoin, backed by DWF Labs, briefly fell below $0.995. Official sources claim that the token has 117% backing, which should ensure its price stability at $1. However, the actual deviation from the peg raises serious questions about the reliability of the information provided.
Lack of Transparency in Reserves
According to available data, 96% of USDf's reserves are held off-chain, meaning that the funds are with third parties and not in verifiable wallets. Only 4% of the reserves are visible on-chain. This raises doubts about the actual composition of the reserves as it has been claimed to be of a mixed type, including user tokens, which can increase the risk of instability.
Impact on DeFi and USDf's Future
USDf is actively used in DeFi markets, such as in Curve's lending markets. There are concerns that if the stablecoin's price falls again or if trust in it diminishes, other DeFi applications could be at risk. Additionally, a 7-day redemption delay for some users complicates responses to adverse price movements.
The recent case of USDf's decline underscores the importance of transparency regarding reserve backing and risk management. Without clear data on actual backing and reserve management, trust in this project remains low.
