As a seasoned crypto investor with a knack for sifting through the noise and navigating the complexities of the digital asset market, I’ve seen my fair share of questionable moves by industry leaders. The recent 12,000 Bitcoin removal from USDD’s collateral reserves by Justin Sun, without the Tron DAO Reserve’s vote, is yet another red flag that raises serious concerns about transparency and decentralization in the crypto world.
As a crypto investor, I find myself caught in the whirlwind of memecoins on the Tron network, where Justin Sun’s latest move is stirring up quite a storm. The controversial decision to remove over $700 million worth of Bitcoin (BTC) as collateral for USDD without the approval of the Tron DAO Reserve has left many, including myself, questioning the transparency and decentralization of this stablecoin. After witnessing this move and the subsequent concerns it raised, Sun has finally stepped up to address the situation.
12,000 Bitcoin Removed From USDD Collateral
It was disclosed on a Wednesday that approximately $732 million worth of Bitcoin, or about 12,000 units, were taken out from the collateral backing the Decentralized US Dollar (USDD) on Tron’s platform.
The digital currency known as USDD operates in a decentralized manner, with an over-collateralization tied to the U.S. Dollar primarily through Tron (TRX). It’s managed by the Tron Decentralized Autonomous Organization (DAO) Reserve. A recent update indicates that most of its reserves are now backed by TRX, except for approximately 20 million USDT.
The modification was done “silently” without the DAO’s consultation or approval despite the continued emphasis on community governance. Reportedly, the USDD transparency page listed 12,000 Bitcoin under an address, which has now been removed.
1) Questions arose among investors over the transparency issue following the removal, with some critics voicing concern. Similarly, many users of X raised eyebrows about the Tron Foundation’s assertion that their coin is a “decentralized stablecoin.”
Others in the community pointed out similarities between Sun’s questionable activities and the events that ultimately caused the downfall of projects like UST and FTX. At the same time, some people observed that the recent developments appear to be a multitude of warning signs or “red flags.”
As an analyst, I’ve noticed that USDD has encountered problems related to its collateral in the past. Specifically, there have been instances where large quantities of HTX were stored without first seeking approval from the Decentralized Autonomous Organization (DAO).
Justin Sun Addresses Concerns
In response to the feedback received, Justin Sun clarified user worries in a recent post on X. The creator of TRON stated that the functioning of USDD (Undercollateralized Stablecoin Dollar) is not enigmatic because it operates similarly to DAI from MakerDAO.
In simpler terms, Sun clarified that when the value of the security (collateral) provided is more than what the system requires, the holders of this security are allowed to withdraw the excess funds. Typically, the required amount is between 125% and 150% of the loan. If the value of the collateral drops below a certain point, it needs to be increased or “topped up”; otherwise, the system might force a sale (liquidation) of the collateral due to insufficient value.
According to Sun, he claims that any holder of collateral can take out any amount they wish without needing approval from others. Additionally, he pointed out that USDD currently has a long-term collateral ratio that surpasses 300%, which is ineffective for optimal use of capital and is slated for an upgrade.
Right now, USDD has collateral that’s over three times its value, indicating less than optimal capital usage. The TRON Decentralized Autonomous Organization (DAO) intends to invest time enhancing USDD in the future, with the goal of making it a more competitive decentralized stablecoin within the market. It’s worth noting that Tron is already a realm of stablecoins.
According to a report by USDD’s X account, Sun’s comments mirrored TRD’s intentions to improve and strengthen their stablecoin. However, Bennet Tomlin from Crypto Critic Podcast has raised doubts about Sun’s statements, arguing that his description doesn’t align with the issuance process detailed on USDD’s website.
Furthermore, he emphasized that, as stated in the whitepaper, the deleted Bitcoins are intended to be controlled by the TRON Decentralized Autonomous Organization (DAO) Reserve, and not any collateral envisioned by Sun. At this point, Sun has yet to address the apparent differences pointed out by Tomlin.
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2024-08-23 17:12