TerraUSD (UST): The Overview of a Popular Stablecoin

WhiteBIT
Published 11 April 2022
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TerraUSD (UST): The Overview of a Popular Stablecoin

Content

Keeping all savings in traditional cryptocurrencies can be risky due to their high volatility. That is why many cryptocurrency enthusiasts choose stablecoins, digital assets tied to fiat currencies such as the dollar or euro. This article will shed light on one of the most popular stablecoins – TerraUSD (UST).

What is Terra?

Terra is a blockchain platform that produces algorithmic stablecoins: TerraUSD, TerraKRW, TerraSDT, and others. The exchange rate of these cryptocurrencies is pegged to the respective fiat currencies and is provided by Terra LUNA, the native blockchain token. The algorithmic stablecoins are based on the mechanism that allows the software and special rules to keep track of changes in the fiat currency rate.

What is TerraUSD (UST)?

TerraUSD is a stablecoin designed on the Terra blockchain, with its value being tied to the US dollar rate. The rate deviations are minimal due to a specially developed tracking algorithm. An algorithmic module that stimulates creating and burning an asset also allows holders to earn on rate fluctuations. UST is the most popular stablecoin of the project and the most popular algorithmic stablecoin in general. Although the asset is less popular than USDT and USDC, it remains on the list of favorite stable cryptocurrencies of many holders.

Emission

UST has an unlimited supply. The coin’s circulating supply at the beginning of April is 16,642,760,978 UST. Unlike the most popular stable cryptocurrencies, USDT and USDC, UST is not backed by fiat or securities. A certain amount of native cryptocurrency LUNA has to be burned to create new tokens. This process is inextricably linked to seigniorage, which involves the creation of two cryptocurrency pools: one for LUNA and the other for the stablecoin. Holders, in turn, must burn assets from the first pool to obtain assets from the second pool and vice versa.

UST features and benefits

The UST developers aim to solve the problem of the balance between the three essential principles of stablecoins: decentralization, transparency, and high capitalization.

The advantages of UST include the following characteristics:

  • Minimal deviation from the dollar exchange rate.
  • High transaction speed is provided by the PoS algorithm backed by an additional Cosmos-SDK technology with the Tendermint consensus verification system.
  • High level of scalability.
  • Exact interest rates.
  • Quick integration into various cryptocurrencies.

Conclusion

UST is an algorithmic cryptocurrency that is a more transparent and modern alternative to traditional popular stablecoins such as USDT. The coin has minimal deviations from the US dollar due to a special adjustment mechanism using the native cryptocurrency LUNA.