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About TerraClassicUSD
Key Points
- TerraUSD (UST) is a decentralized and algorithmic stablecoin pegged to the US Dollar.
- It was launched in September 2020 by Do Kwon and Daniel Shin, the founders of Terra.
- UST is scalable, yield-bearing, and has interchain usage.
- It has several benefits, including easy integration into crypto wallets and use in DeFi protocols.
- UST can be used with LUNA, Terra’s non-stablecoin crypto, or as a standalone token.
Founders
- Do Kwon: CEO
About TerraClassicUSD (USTC)
Introducing TerraUSD (UST): A Stablecoin Pioneer
TerraUSD (UST) is the decentralized and algorithmic stablecoin native to the Terra blockchain, designed to provide a scalable, yield-bearing alternative pegged to the value of the US Dollar. By offering a solution to the scalability limitations faced by other leading stablecoins, such as Dai, TerraUSD aims to deliver value to the Terra community, boasting enhanced scalability, precise interest rates, and seamless interchain functionality.
TerraUSD boasts a multitude of benefits that have catapulted it to prominence as a formidable stablecoin competitor. Notably, its innovative minting mechanism enables seamless integration with DeFi protocols, thereby ensuring scalability is maintained. Furthermore, UST can be effortlessly incorporated into crypto wallets by merely integrating TerraUSD as a payment method. Additionally, TerraUSD has demonstrated its prowess in the realm of DApps, where platforms leveraging fungible synthetic assets and tracking real-life asset prices rely on UST as a trusted pricing benchmark.
TerraUSD (UST), launched in September 2020 in collaboration with Bittrex Global, has established itself as the most scalable stablecoin in the market. Notably, UST can be utilized in tandem with LUNA, Terra’s non-stablecoin cryptocurrency, or function as a standalone token, offering unparalleled flexibility.
The Visionaries Behind TerraUSD: Unveiling the Founding Team
In April 2019, Do Kwon and Daniel Shin co-founded Terra (LUNA), a pioneering venture that would soon disrupt the stablecoin landscape. Fast-forward to September 2020, when they successfully launched TerraUSD on Bittrex Global. Since its inception, TerraUSD has consistently outperformed many of its stablecoin counterparts, including GUSD (Gemini) and PAX (Paxos), in the market. Notably, Terra operates on its own blockchain, a creation of Terraform Labs, a subsidiary of the Terra Alliance.
At the helm of Terraform Labs is Do Kwon, a visionary CEO with a storied past. Prior to his current role, Kwon honed his skills as a software engineer at tech giants Microsoft and Apple. His entrepreneurial spirit also led him to found Anyfi, a pioneering startup that specializes in decentralized solutions for wireless mesh networks. Notably, Kwon’s accomplishments have earned him a coveted spot on Forbes’ prestigious 30 Under 30 list, recognizing the world’s most accomplished young entrepreneurs.
Co-founder Daniel Shin, a distinguished economist and entrepreneur, boasts an impressive track record. Prior to Terra Alliance, he co-founded Fast Track Asia, a pioneering startup incubator, and successfully co-founded and led TMON (Ticket Monster), a prominent South Korean e-commerce platform.
Unveiling the Uniqueness of TerraUSD (UST)
- Enhanced Scalability – As an algorithmic stablecoin, TerraUSD boasts a value equivalent to the face value of minted stablecoins. Notably, the issuance of 1 TerraUSD requires the burning of 1 LUNA reserve asset, effectively allowing TerraUSD’s monetary policy to scale virtually without limits, thereby empowering DeFi projects to reach their full potential.
- Seamless Exchange – The stablecoins within the Terra ecosystem share a unified liquidity pool, enabling the exchange of TerraUSD for TerraKRW (pegged to the Korean Won) with minimal fees, ensuring a hassle-free experience.
- Passive Income Opportunities – Furthermore, users can leverage TerraUSD to generate passive income through the Anchor protocol, which offers stable interest rates. Specifically, Anchor promises a 20% return on UST savings. Additionally, rewards from PoS chains, which maintain stability through commissions and inflation, provide a steady income stream, ultimately enabling the formation of a reliable interest rate.
- Interoperability – The Dropship bridge protocol seamlessly connects TerraUSD to various blockchain ecosystems, integrating it with numerous DeFi and DEX platforms. Crucially, Dropship facilitates the transfer of assets between chains, while the LUNA supply and demand dynamics determine the value of TerraUSD, ensuring a stable UST cost and scalability.
In summary, TerraUSD (UST) pioneers the decentralized stablecoin landscape, boasting a trifecta of benefits: lucrative interest earnings, unparalleled scalability, and seamless interchain transferability.
The UST Depegging Conundrum: Unraveling the Mystery
On May 9, 2022, the UST stablecoin dramatically lost its parity, plummeting from its intended value of $1 to a nadir of $0.68. As of this writing, the prospect of UST regaining its peg remains uncertain.
Following the initiation of UST trading at a slight discount to its dollar peg, the Curve pool containing UST underwent a progressive depletion, as investors opted to exchange their UST holdings for alternative stablecoins. Concurrently, the short selling of LUNA exerted downward pressure on its price, which, in turn, compelled Terra to increase the supply of LUNA in a bid to stabilize the situation.
The precipitous decline of UST triggered a downward spiral, which in turn diluted the value of LUNA, yet failed to restore the peg. Even the drastic measure of selling $1.5 billion worth of BTC from Terra’s treasury proved ineffective in reinstating confidence in UST. In a scenario reminiscent of a bank run, UST holders preferred to accept significant losses, opting to sell their UST at a fraction of its value rather than redeem it for LUNA.
For a comprehensive analysis of the UST depeg, please refer to our detailed breakdown.
What is the Luna Foundation Guard (LFG)?
The Luna Foundation Guard (LFG), the governing body behind Terra, the entity responsible for the LUNA and UST tokens, garnered widespread attention when it embarked on a series of Bitcoin purchases, culminating in a record-breaking LUNA high just a month prior to the UST depegging event. Initially, the LFG’s stated objective was to amass a Bitcoin reserve valued at $10 billion. However, in a desperate bid to salvage the UST peg, the organization was forced to liquidate its Bitcoin holdings. As of this writing, it remains uncertain whether the LFG will resume its Bitcoin acquisition strategy in the future.
What Is the Circulating Supply of TerraUSD (UST) Coins?
TerraUSD (UST) is a stablecoin native to the Terra blockchain. Notably, the UST token does not rely on technical backing. Instead, its creation is facilitated through the burning of LUNA tokens.
The value of UST fluctuates in response to the dynamic interplay between supply and demand for the asset and the US dollar. When the value of UST surpasses the dollar mark, LUNA holders are incentivized to sell their tokens for UST, thereby increasing the supply of UST. This, in turn, drives up the price of LUNA. Conversely, when investors seek to realize profits by reducing their UST holdings, they can sell their UST tokens for Terra (LUNA), thereby returning the UST price to its target level. As a result, a corresponding amount of LUNA is removed from circulation, creating scarcity and, consequently, increasing its value.
As of June 2021, the maximum supply of TerraUSD (UST) stands at approximately 1.93 billion units, with its scalability and functionality features rendering it one of the most prominent stablecoins in the cryptocurrency landscape.
The Security Architecture of the TerraUSD Network
TerraUSD (UST) is pegged to the value of the US dollar and is collateralized by Terra (LUNA), an asset reserve that guarantees the stability and security of UST through the seigniorage process, which generates revenue from the issuance of new money.
Miners also play a pivotal role in maintaining Terra’s security. By participating in a proof-of-stake (PoS) consensus, they provide stability by absorbing short-term demand volatility, thereby ensuring the network’s resilience. A stable demand for mining is, after all, a crucial prerequisite for security and stability. Consequently, the TerraUSD protocol is designed to provide consistent rewards, regardless of economic conditions, thereby enabling TerraUSD to compensate those who safeguard and develop the network.
Where to Acquire TerraUSD (UST): A Comprehensive Guide
To acquire TerraUSD (UST), you’ll need to possess Bitcoin or Ether, which can be swapped for UST on various cryptocurrency exchanges where the token is listed. Notable exchanges include KuCoin, Uniswap (V2), Bittrex, Bitfinex, Gate.io, PancakeSwap (V2), Sushiswap, Terraswap, 1inch Exchange, MEXC, OpenOcean, and DODO BSC.
Delve into the world of cryptocurrency and discover how to acquire Bitcoin and other digital assets on our comprehensive education platform, CoinMarketCap Alexandria.
The Intricate Dynamics of UST and LUNA: A Harmonious Relationship
Following the UST depegging, Do Kwon unveiled a comprehensive revival plan, which entailed bifurcating the Terra blockchain into a novel chain, dubbed Terra (occasionally referred to as Terra 2.0). The original Terra chain would persist as Terra Classic. This revival plan garnered sufficient community support through a vote, prompting the majority of DeFi DApps to subsequently migrate to the new Terra 2.0 chain.
TerraClassicUSD (USTC), formerly known as UST, is now confined to the outdated Terra Classic blockchain, with no plans for migration to Terra 2.0, as per Do Kwon’s declaration. Moreover, there will be no revamped version of the algorithmic stablecoin. Consequently, TerraClassicUSD is, in effect, a defunct stablecoin, with no prospects of regaining its dollar parity in the future.
Anchor Protocol Yield Reserve Replenishment
Anchor Protocol is a decentralized savings protocol that offers attractive, low-volatility yields on TerraUSD deposits. The Anchor yield, currently around 19.5%, is generated through a combination of staking rewards from prominent proof-of-stake blockchains and interest payments from borrowers, with the potential to emerge as the benchmark interest rate in the cryptocurrency sphere.
Total deposits on Anchor have surged from $2.5 billion in early December 2021 to over $6.5 billion currently, with more than $10 billion worth of UST, including collateral, now locked up in the protocol as crypto enthusiasts flock to capitalize on the attractive yields amidst the market downturn. Consequently, concerns have mounted over the protocol depleting its yield reserve, which is being drained at a rate of approximately $2 million per day, in order to maintain the high benchmark returns. However, on February 18, 2022, Do Kwon, the founder of Terra, alleviated these concerns by announcing a $450 million top-up to the Anchor yield reserve, which now stands at over $500 million.
Associated Resources:
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