Justin Sun Removes USDD Stablecoin’s $726M BTC Collateral, Now Backed Primarily by TRX

The USDD stablecoin, issued by the TRON DAO Reserve, has seen the removal of 12,000 Bitcoin, valued at approximately $726 million, from its collateral.

The move has left USDD primarily backed by TRX, the native token of the Tron blockchain, raising concerns among the communty.

The change, first noticed on social media platform X, was made without any official announcement from the TRON DAO.

lmao @justinsuntron silently removed the 12.000 btc as USDD collateral recently and it's now 100% backed by tron (except for 20mil. usdt).

This was the address: 1KVpuCfhftkzJ67ZUegaMuaYey7qni7pPj

— Symbio (@NoCryptFish) August 21, 2024

Sun Down Plays the Collateral Removal

In response to the reports, Tron founder Justin Sun took to X to explain that the operation is “not mysterious.”

According to Sun, any collateral holder has the freedom to withdraw funds without requiring approval, likening USDD’s mechanism to that of MakerDAO.

Sun also acknowledged that USDD, which currently maintains a “long-term collateralization rate” exceeding 300%, is not capital efficient.

He hinted at future upgrades to the stablecoin, aiming to enhance its competitiveness in the decentralized finance (DeFi) market.

However, Sun’s comments did not clarify the extent of the TRON DAO’s involvement in the decision to remove Bitcoin from the collateral.

Regarding the decentralized stablecoin USDD, its mechanism is similar to MakerDAO's DAI and is not mysterious. When your collateral exceeds the amount specified by the system (usually between 120%-150% depending on the vault), any collateral holder can withdraw any amount freely…

— H.E. Justin Sun 孙宇晨(hiring) (@justinsuntron) August 22, 2024

Originally launched as an algorithmic stablecoin similar to Terra’s UST, USDD transitioned to a hybrid model backed by a mix of assets, including Bitcoin, TRX, USDT, and USDC.

Despite its recent changes, USDD remains pegged to the U.S. dollar with a market cap of around $744 million, positioning it just within the top 100 cryptocurrencies.

TRX, now the primary backing for USDD, has seen increased volatility but remains a top 10 cryptocurrency when excluding stablecoins.

Trading at $0.15, TRX’s value has more than doubled over the past year, partly due to its use in the emerging memecoin marketplace.

The Tron ecosystem itself has also grown, recently surpassing Solana to become the second-largest blockchain by total value locked (TVL), with $8.2 billion across over 30 DeFi protocols, according to DeFi Llama.

Tron’s SunPump Outperforms Solana’s Pump.fun

As reported, Tron’s new meme coin launchpad SunPump has captured the attention of degen traders, overshadowing the once-dominant Solana-based platform, Pump.fun.

Pump.fun has been a leading force in the meme coin space throughout the year, facilitating the launch of some of the most successful tokens, including Billy and Michi.

At its peak, Pump.fun saw over 20,000 tokens launched daily, generating more than $2 million in revenue.

However, the launch of SunPump last week has disrupted this momentum.

The platform has quickly gained traction, with tokens like Sundog (SUNDOG) on Tron skyrocketing to a market cap of $190 million, far outpacing Pump.fun’s top token, Michi (MICHI), which stands at $61 million.

Meanwhile, the Tron Foundation and Sun are currently embroiled in legal disputes in the US.

Last year, the SEC sued Sun and the Tron Foundation, alleging that they engaged in the unregistered offer and sale of securities, manipulative trading, and illegal promotion of crypto assets, specifically Tron (TRX) and BitTorrent (BTT) tokens.