What Is TerraUSD (UST)?
On the Terra network, TerraUSD (UST) is the algorithmic and decentralised stablecoin. Scalable, yield-bearing, and value-pegged to the US dollar, it is a coin. When other stablecoin leaders like Dai experienced major scaling issues, TerraUSD was developed to provide value to the Terra community and provide a scalable alternative for DeFi. Thus, TerraUSD assures consumers of greater scalability, precision in interest rates, and interchain usage.
TerraUSD stands out among competitors for stablecoins thanks to a number of advantages it offers. Because of its minting technique, UST satisfies the specifications of the DeFi protocols it employs without sacrificing scalability. Another simple way to add UST to cryptocurrency wallets is to include TerraUSD as a payment option. DApps are another area where TerraUSD has demonstrated its strength. For instance, UST is used as a pricing benchmark by platforms that produce fungible synthetic assets and monitor real-world asset values.
In partnership with Bittrex Global, TerraUSD (UST) was introduced in September 2020, and since then, it has established a reputation as the most scalable stablecoin. UST can be used separately or in conjunction with LUNA, Terra’s non-stablecoin cryptocurrency.
The UST LUNA Relationship
Do Kwon offered a revival plan after the UST depeg that would divide the Terra blockchain into a new chain called Terra (also sometimes called Terra 2.0). The Terra Classic brand would replace the previous Terra chain. The majority of the DeFi DApps ultimately transferred to the new Terra 2.0 chain once the community approved this restoration plan.
TerraClassicUSD (USTC) is the new name for UST, which is still solely traded on the original Terra Classic blockchain. Do Kwon claims that neither a migration of USTC to Terra 2.0 nor an improved version of the algorithmic stablecoin will take place. As a result, TerraClassicUSD is effectively no longer a stablecoin and is not anticipated to ever again be pegged to the dollar.
Who Are the Founders of TerraUSD?
In April 2019, Do Kwon and Daniel Shin established Terra (LUNA). They introduced TerraUSD on Bittrex Global in September 2020. Since then, TerraUSD has outperformed a number of stablecoin rivals on the market, including GUSD (Gemini) and PAX (Paxos). Terra is the proprietary blockchain for TerraUSD, developed by Terraform Labs (a subsidiary of Terra Alliance).
The CEO of Terraform Labs is Do Kwon. He was a former software engineer for Apple and Microsoft. He was also the CEO of Anyfi, a young company that offered decentralised solutions for wireless mesh networks. Kwon is listed among the world’s most prosperous businesspeople on the Forbes 30 Under 30 list.
Co-founder Daniel Shin is an accomplished businessman and economist. Prior to Terra Alliance, he managed to co-found and head TMON (Ticket Monster), a South Korean e-commerce platform, as well as Fast Track Asia, a business incubator.
What Makes TerraUSD (UST) Unique?
TerraUSD is an algorithmic stablecoin with a value equal to the face value of minted stablecoins. To issue 1 TerraUSD, you need to burn 1 LUNA reserve asset. It turns out that TerraUSD’s monetary policy scales nearly without limits, thereby helping DeFi projects reach their full potential.
The stablecoins in the Terra ecosystem share the total liquidity, meaning you can exchange TerraUSD for TerraKRW (their stablecoin pegged to the Korean Won) with minimal fees.
Passive Income Potential
Additionally, users can gain passive income using TerraUSD with the Anchor protocol’s stable interest rates. Anchor is a lending protocol that promises a 20% return on UST savings. Additional and steady income appears through rewards in PoS chains, which maintain their stability due to commissions and inflation. This nuance will make it possible to form a reliable interest rate.
With the Dropship bridge protocol, TerraUSD allows blockchain ecosystems to be connected. Dropship integrates TerraUSD into numerous Defi and DEX platforms, and most importantly, moves assets between chains. LUNA supply and demand determine the value of TerraUSD. Thus, a stable UST cost is guaranteed as the Dropship protocol helps maintain scalability.
To summarize, TerraUSD (UST) is the first decentralized stablecoin that provides interest earnings, incredible scalability, and easier interchain movement.
Anchor Protocol Yield Reserve Top Up
A decentralised savings protocol called Anchor Protocol offers deposits in TerraUSD low-volatile returns. The community believes that the Anchor yield (approximately 19.5%), which is produced from staking incentives from significant proof-of-stake blockchains and from interest paid by borrowers, might serve as the industry standard for interest rates in cryptocurrencies.
By early December 2021, there were $2.5 billion in total deposits on Anchor; today, there are over $6.5 billion. The system presently has over $10 billion in UST, including collateral, locked up as crypto users swarm in to profit from the alluring rates during the market slump. Concerns about the protocol depleting its yield reserve (at a rate of about $2M per day) in order to maintain the high benchmark returns grew as a result. Do Kwon, the founder of Terra, announced a $450 million increase in the anchor yield reserve on February 18, 2022. The yield reserve is currently over $500 million.
Why Did UST Depeg?
UST depegged on May 9, 2022, and fell from $1 to a low of $0.68. Whether UST will regain its peg is unknown as of this writing.
The Curve pool holding UST gradually became empty as individuals began to exchange their UST for other stablecoins once UST began trading slightly below its dollar peg. At the same time, the price of LUNA, the collateral for UST, fell due to short selling. In an effort to counteract this downward pricing pressure, Terra had to mint even more LUNA.
the UST’s spiralling downward. This reduced the cost of LUNA without restoring the peg. Even a $1.5 billion sale of BTC from Terra’s treasury was unable to win back public confidence in UST. Owners of USTs would prefer take pennies on their UST than redeem it for LUNA, which is similar to a bank run.
The UST depeg’s complete breakdown may be found here.
What s the Luna Foundation Guard (LFG)?
The corporation Terra, which is responsible for creating the UST and LUNA tokens, is managed by the Luna Foundation Guard (LFG). One month before the UST depeg, LFG made headlines by constantly purchasing Bitcoin, which caused the price of LUNA to reach an all-time high. Although the Luna Foundation Guard’s stated objective was to amass $10 billion worth of Bitcoin, it was forced to sell off its Bitcoin reserve in an effort to preserve the UST peg. It’s unknown at this moment if LFG will keep purchasing Bitcoin in the future.
How Many TerraUSD (UST) Coins Are There in Circulation?
A stablecoin based on the Terra network is called TerraUSD (UST). There is no technical support for the UST token. Instead, burning LUNA tokens makes it easier to create the UST.
The supply and demand for the asset as well as the value of the US dollar both influence how much the UST is worth. Holders of LUNA may exchange their tokens for UST when the UST’s value exceeds $1. In addition, prices for LUNA are rising as a result of the expansion of the UST supply. UST tokens can be exchanged for Terra when supplies are cut back for financial gain (LUNA). The UST price is brought back to the desired level by this step. As a result, a certain quantity of LUNA is consumed, increasing their rarity and value.
With a maximum supply of roughly 1.93 billion UST as of June 2021, TerraUSD (UST) is one of the most notable stablecoins available on the cryptocurrency market.
How Is the TerraUSD Network Secured?
TerraUSD (UST) is backed by Terra and is pegged to the value of one dollar (LUNA). Through the seigniorage process, LUNA, an asset reserve, assures the stability and security of the UST (income received from an emission of money).
The security of Terra is also significantly influenced by miners. Through their participation in a proof-of-stake (PoS) consensus, miners help Terra maintain stability by absorbing transient demand volatility. After all, one of the key prerequisites for safety and stability is a steady demand for mining. The TerraUSD protocol therefore aims to offer reliable rewards in all economic circumstances. In this manner, TerraUSD is able to pay individuals that uphold and develop the network.
Where Can You Buy TerraUSD (UST)?
You must have Bitcoin or Ether to exchange for TerraUSD (UST) on the exchanges where the token is listed in order to purchase TerraUSD (UST). KuCoin, Uniswap (V2), Bittrex, Bitfinex, Gate.io, PancakeSwap (V2), Sushiswap, Terraswap, 1inch Exchange, MEXC, OpenOcean, and DODO BSC are some of these exchanges.
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