Justin Sun Addresses Concerns Over 12,000 Bitcoin Withdrawal from USDD’s Collateral
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The Tron DAO Reserve’s recent decision to withdraw 12,000 Bitcoin has led to questions about the decentralization and stability of USDD.
On Wednesday, the Tron DAO Reserve, which oversees the USDD stablecoin, removed 12,000 Bitcoin worth $732 million from its collateral backing. This move has led to concerns about the stability and decentralization of USDD, a stablecoin governed by the Tron DAO Reserve.
Justin Sun, founder of Tron, has attempted to address these concerns by providing context around the collateralization practices of USDD.
In a recent statement, Sun emphasized that the long-term collateralization rate for USDD exceeds 300%. This figure indicates that the stablecoin is backed by significantly more assets than its circulating supply.
Understanding Collateralization Rates
Collateralization rate is a measure of the value of assets backing a stablecoin relative to its issuance. Sun explained that despite the recent Bitcoin withdrawal, the USDD remains well-collateralized.
According to USDD’s transparency page, the current collateralization ratio stands at approximately 230%. This means the value of the assets backing USDD is more than twice the value of the stablecoin in circulation.
Sun compared USDD’s mechanisms to MakerDAO’s DAI, another popular decentralized stablecoin. He highlighted that USDD’s system allows for the free withdrawal of collateral when it exceeds the required amount, and necessitates additional collateral or liquidation if it falls below a certain threshold.
According to Sun, “This is part of the basics of DeFi 101.”
Sun’s Reassurances on USDD’s Stability
