The decentralized stablecoin USDD, launched on Tron, has undergone a significant adjustment to its collateral backing. Arkham Intelligence, an analyst firm reported that approximately 12,000 Bitcoin, previously held as part of USDD’s collateral, have been removed without a governance vote. This has led to concerns about the coin’s decentralization claims.
Collateral Change Raises Questions
USDD’s transparency page once listed an address holding around 12,000 BTC, valued at $729 million. The Bitcoin was quietly withdrawn from the collateral on August 19. Despite frequent claims that USDD is governed by the Tron DAO Reserve, no official vote was held to approve the change. Only one vote has occurred within the DAO’s history, in May 2023, addressing the use of burned TRX tokens for the stablecoin.
Notably, the recent removal of Bitcoin has raised concerns among observers, some of whom allege that Tron founder Justin Sun is responsible. Others question the transparency of the Tron DAO Reserve’s governance mechanisms. However, despite these allegations, there is no direct evidence linking Sun to the move.
Justin Sun’s Response
Justin Sun responded to concerns on August 22, explaining that the adjustment aligns with decentralized finance principles. He argued that the USDD’s mechanism is similar to MakerDAO’s DAI, where collateral holders can withdraw without any approval, if certain conditions are met. Sun pointed out that USDD’s collateralization rate currently exceeds 300%, which he believes leads to inefficient capital utilization. Therefore, the removal of Bitcoin, in his view, was justified under DeFi rules.
Sun further clarified that collateral holders may freely withdraw funds when the collateral exceeds the system’s required amount. If collateral falls below a specific level, top-ups are necessary to avoid liquidation. He also noted that the Tron DAO Reserve plans to upgrade USDD to enhance its competitiveness in the decentralized stablecoin market.
Justin Sun Transfers $156.4M BTC Amid Custody ChangeUSDD’s Governance Structure Questioned
Despite Sun’s explanation, concerns over the lack of a formal vote persist. According to USDD’s governance page, no recent proposals have been put to a vote, suggesting a governance gap. The sole vote in the DAO’s history addressed unrelated matters, leaving the recent change unexplained in terms of formal governance.
The situation raises questions about the governance structure surrounding USDD and whether it aligns with the decentralized ideals it promotes. With TRX making up the majority of USDD’s collateral, observers are closely watching for further developments within the Tron DAO Reserve’s operations.
