Cardano founder Charles Hoskinson has expressed dissatisfaction with the latest developments regarding Tron’s native stablecoin, USDD. Hoskinson reacted to a report that Tron’s native stablecoin quietly lost a substantial portion of its Bitcoin backing.
Hoskinson Criticizes Tron USDD
A report revealed that 12,000 BTC, equivalent to $750 million, had been withdrawn from the stablecoin’s collateral reserves without prior community consultation or public disclosure.
NEW: Justin Sun is reassuring users after the Tron DAO Reserve withdrew nearly 12,000 #Bitcoin ($750M) backing the USDD stablecoin on Wednesday.
Launched in 2022 as a competitor to Terra’s now-defunct UST token, USDD is now primarily backed by Tron’s native token, TRX 🤔 pic.twitter.com/3dDCmHK9eO
— Bitcoin News (@BitcoinNewsCom) August 22, 2024
This move has fundamentally altered the composition of USDD’s backing, making it solely dependent on Tron’s native cryptocurrency, TRX. Hoskinson revealed his displeasure in a tweet, responding to the news with a pointed GIF and signaling his disapproval of the situation.
The tweet he quoted highlighted that Tron Network’s founder, Justin Sun, defended this controversial decision. Unfortunately, this lack of transparency in removing Bitcoin from the reserves has raised some concerns.
These concerns regard the decentralized nature of the Tron DAO, which governs the USDD stablecoin.
The TRON DAO Reserve, which issues USDD, is supposed to function as an autonomous governance system. This means that critical decisions should ideally be made through community votes.
However, this sizable Bitcoin withdrawal was executed without any such vote, leading to questions about the process’s true decentralization. The last significant decision put to a community vote by the TRON DAO was in May 2023 on using TRX from USDD’s TRX burning contract.
If the TRON DAO had opened Bitcoin to the community, the next decision should have been to remove it from its reserves.
In response to the growing scrutiny, Justin Sun attempted to reassure the Tron community and USDD users. He addressed the issue on social media platform X, downplaying the significance of the Bitcoin withdrawal.
Sun compared USDD to MakerDAO’s DAI stablecoin, suggesting that such actions are routine within the decentralized finance (DeFi) space.
He emphasized that USDD’s collateral was at an impressive 300%, far exceeding the typical threshold of 120% to 150%.
According to Sun, this meant that any collateral holder could withdraw funds from the reserves without needing specific authorization, a concept he referred to as the “basics of DeFi 101.”
Sun further explained that the TRON DAO Reserve was planning upgrades to USDD to make the algorithmic stablecoin more competitive.
Despite the reassurances, the incident has left many in the crypto sector, including Hoskinson, questioning the governance and transparency of the Tron network.
Currently, USDD has a total supply of $744,337,556, ranking 82nd in the crypto market by market cap. With the withdrawal of Bitcoin, USDD’s collateral ratio has dropped to 229%.
The stablecoin’s collateral is now valued at $1,706,624,789, with 98.9% of this value backed by 10.9 billion TRX and $19 million USDT. This marks a significant decline from its 2022 collateral reserve value of $2.2 billion.
Disclaimer: The opinions expressed in this article do not constitute financial advice. We encourage readers to conduct their own research and determine their own risk tolerance before making any financial decisions. Cryptocurrency is a highly volatile, high-risk asset class.
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