The USDD stablecoin, issued by the TRON DAO Reserve, has recently lost its Bitcoin backing. This happened after 12,000 BTC were removed from its collateral address. With Bitcoin valued at around $726 million gone, USDD is now mainly backed by TRX, the native token of the Tron blockchain.

This change was noted on X (formerly Twitter) without any official announcement from TRON DAO. In response to questions, Tron founder Justin Sun explained that what's happening is "not mysterious." He pointed out that "any collateral holder can withdraw any amount freely without anyone's approval." He compared this process to how MakerDAO operates. Sun also mentioned that USDD isn't very capital efficient and has a "long-term collateralization rate" of over 300%.

Sun added that the TRON DAO Reserve plans to work on upgrading USDD to make it a more competitive decentralized stablecoin in the market. However, he didn’t clarify whether the DAO was involved in this recent change.

Originally, USDD was an algorithmic stablecoin, similar to Terra’s UST, which collapsed dramatically in May 2022. It has since shifted to a hybrid model, backed by various assets, including Bitcoin, TRX, USDT, and USDC.

As of now, USDD is pegged to the U.S. dollar and has a market cap of about $744 million, according to CoinGecko. It barely stays in the top 100 cryptocurrencies, currently ranked 96th, and has recently been surpassed by PYUSD, a new stablecoin from PayPal.

TRX, which now serves as the main backing for USDD, is more volatile. It holds a spot in the top 10 cryptocurrencies, excluding stablecoins. Trading at $0.15, TRX has seen a significant rise lately. Tron and Sun are promoting it as a memecoin marketplace. In fact, TRX has more than doubled in value over the past year, with a market cap of $13.5 billion.

Recently, the Tron ecosystem surpassed Solana to become the second-largest blockchain by total value locked (TVL). It now holds $8.2 billion across more than 30 different decentralized finance (DeFi) protocols, according to data from DeFi Llama.