Heavily Centralized? 12,000 BTC Removed From USDD Reserves Without Tron DAO Approval

USDD, the flagship algorithmic stablecoin for the Tron blockchain, has recently faced a significant shift in its basket of reserves. Before now, the stablecoin’s reserves include approximately 12,000 BTC (worth over $729 million). However, the latest on-chain data reveals that the BTC stash has been withdrawn.

Various community members have questioned this move, which reduces USDD’s reserve portfolio. Some accuse the Tron network’s founder, Justin Sun, of the action, while others worry about the stablecoin’s decentralization since the transaction was executed without Tron DAO’s approval.

Sun Labels Action as “DeFi 101”

Stablecoins are natively designed to maintain a 1:1 peg to a particular asset. The token is backed by other digital assets to keep the price on par with the intended asset. USDD, being one of the major cryptocurrencies in the Tron ecosystem, is collateralized by several cryptocurrencies, including BTC, USDT, USDC, and TRX. 

With the latest withdrawal of the BTC holdings, USDD heavily depends on TRX, another Tron ecosystem token. It currently has $1.7 billion worth of TRX and USDT in its reserves, representing 230% in the collateralization ratio. 

While the collateralization ratio is considerably higher than top stablecoins like USDT and USDC, community members worry about the sudden action without undergoing a vote on Tron DAO. This argument comes because the team behind USDD explained that the decentralized autonomous organization will make decisions involving the stablecoin.

Addressing the matter, Sun argued that USDD’s mechanism is similar to MakerDAO’s DAI stablecoin, so it “is not mysterious.” He added that the move is common in the DeFi sector.

“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,” he wrote.

Users Dump USDD

Community members unsatisfied with USDD’s transparency and reserve system have moved their assets from the stablecoin. According to on-chain data from price tracking platform CoinMarketCap, the stablecoin’s daily traded volume has dropped by nearly 20% to $2.79 million.

Notably, the stablecoin has maintained its 1:1 peg to the United States dollar.