The DeFiChain (DFI) project, co-founded by Julian Hosp, is suspected of not holding enough Bitcoin to secure the dBTC used in the ecosystem. DeFiChain is struggling to provide an explanation.
DeFiChain (DFI) has been in serious trouble since the summer of 2022, when the algorithmic stablecoin DUSD, which is part of the ecosystem, lost its 1:1 peg to the US dollar. The founders Julian Hosp and U-Zyn Chua are now fighting each other in court. There is now a heated debate on Reddit as to whether investors in DeFiChain are being systematically taken for a ride. A Reddit user claims to have proven that Bitcoin is being used unfairly on DeFiChain.
You need to know this: DeFiChain advertises Bitcoin (BTC) and important altcoins such as Ethereum (ETH) in its ecosystem as so-called wrapped tokens. This should make it possible to avoid high transaction costs. Normally, dBTC as the DeFiChain version of Bitcoin should be backed 1:1 by real BTC. But the blockchain analysis revealed: DeFiChain currently holds 995 Bitcoin to cover dBTC, but there are at least 1730 dBTC circulating in the ecosystem. Julian Hosp and DeFiChain have repeatedly assured that customer funds in dBTC are secured 1:1 by Bitcoin, which is actually a matter of course.
Bake, the crypto company behind DeFiChain, has commented on the allegations on X. According to them, the differences between dBTC and Bitcoin deposited as collateral are the result of arbitrage trading between the decentralized DeFiChain crypto exchange and a centralized crypto exchange. However, commentators are not convinced by this explanation. After all, if DeFiChain users decided to exchange all their dBTC back into Bitcoin, this would end in a fiasco according to the information available. It remains to be seen where DeFiChain would find the missing 700 Bitcoin in the event of a “bank run”.
Conclusion: DeFiChain suspected of fraud due to dBTC and Bitcoin
The usually talkative Julian Hosp remains silent on X about the opaque situation at DeFiChain. DFI is trading at an all-time low against Bitcoin, and the loss of trust in the project that began a year and a half ago is continuing. As it stands now, there are a good 700 “fake bitcoins” in the DeFiChain ecosystem, which would be worth the equivalent of around 30 million US dollars. Crypto investors who want to dismiss this as a trifle risk further losses with DeFiChain.
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