Coming with the slogan of programmable money for the internet, TerraUSD powers money innovation. At first glance, TerraUSD comes with trying to provide exchange rate stability through an algorithm that can maintain a balance for arbitrage for Terra prices.
TerraUSD is a stable coin that works on the Terra blockchain network, which allows using UST for global transfers pegged to a fiat currency.
The popularity of TerraUSD is currently on the rise as the stable coin UST is currently ranked #13 on Coinmarketcap with a market cap of $17,599,207,813. The number of tokens in circulation is currently 17.57 million UST without a maximum supply.
- 1 What is TerraUSD?
- 2 How TerraUSD works
- 3 Is TerraUSD the same as LUNA?
- 4 TerraUSD founder
- 5 TerraUSD blockchain
- 6 Terra wallet station
- 7 What is TerraUSD used for?
- 8 How to stake TerraUSD?
- 9 Is TerraUSD the same as USDT?
- 10 How to buy TerraUSD?
- 11 How to sell TerraUSD?
- 12 Is TerraUSD a good investment?
- 13 Final thought
What is TerraUSD?
TerraUSD, ticker symbol UST is one of the cryptocurrencies in the category of decentralized stablecoins. It is programmable and pegged at 1 US dollar.
TerraUSD (UST) is here to provide a scalable solution for Defi which is a common problem with other leading stable coins like DAI.
TerraUSD which works using the Terra protocol offers an accurate interest rate. Also, scalability and interchain deployment support multiple blockchain protocols.
But actually, UST can not only be pegged to USD but can also be pegged to other fiat currencies, such as KRW which will become TerraKRW. Or also pegged to EUR, CNY, JPY, GBP, and the IMF SDR.
Every 1 UST, will be equivalent to 1 unit of currency with high accuracy because it uses the arbitrage method when 1 UST is above or below the flat currency value.
How TerraUSD works
TerraUSD works on the Terra blockchain using Proof of stake consensus, in which the TerraUSD stable coin is used in conjunction with the LUNA token.
Within the Terra blockchain, LUNA tokens play a role in network governance and reward staking. While the stable coin TerraUSD will track currency prices consistently flat and use an arbitrageur to get a balance in the value of UST.
When a user scores 1 Terra, then he must burn 1 LUNA. While the value of 1 Terra stablecoin depends on the currency of the flat held, for example, the user mint 1 TerraUSD, here the USD currency is the counterpart.
How to keep the value pegged
The general mirror of stablecoins is that the network will force to maintain a balance of demand and supply.
For example, if Terra is pegged at 1 USD, it will be TerraUSD, when Terra’s value is below 1 USD say $0.9 then users and arbitrage can send 1 TerraUSD into the system to get 1 USD worth LUNA.
On the other hand, when 1 TerraUSD is above USD, say $1.1 then, users and arbitrageurs can send 1 USD worth LUNA into the system to get 1 TerraUSD.
For the arbitrageur, this will be a risk-free profit, where he earns a profit margin of 0.1 when they send Terra LUNA into the system at $0.9, or $1.1.
Is TerraUSD the same as LUNA?
Although both are on the same blockchain protocol, namely the Terra blockchain, the functions of the two have fundamental differences.
- LUNA, which is the native token of the Terra blockchain, acts as a token for network governance and mining. Since Terra blockchain uses Proof of Stake, LUNA tokens are used by validators to validate transactions in the network to earn LUNA as rewards.
- Terra is a stablecoin that tracks the price of a fiat currency. Terra money can be used for online transactions on both web3, NFT, and Defi projects. Moreover, Terra, which utilizes the decentralized Terra protocol, can be used globally without a hitch. That would eliminate the role of intermediaries in cross-border money transfer transactions.
After successfully launching Terra LUNA in April 2019, Do Kwon and Daniel Shin then launched TerraUSD in September 2020 via Bittrex Global.
Do Kwon has a former software engineer background at Microsoft and Apple. He is also the CEO of Terraform Labs, a subsidiary of the Terra Alliance that built the Terra Blockchain.
Even Kwon by Forbes magazine is included in the list as a successful entrepreneur under 30 years old. In addition, Kwon also serves as CEO of Anyfi.
Daniel Shin as Co-Founder of Terra blockchain is a talented economist and entrepreneur. Previously he was instrumental in founding Fast Track Asia, a startup incubator. He also succeeded in establishing e-commerce in South Korea under the brand name TMON (Ticket Monster).
TerraUSD and LUNA use the Terra blockchain. Terra blockchain was built to create a decentralized digital payment ecosystem using stable coin crypto assets.
The most popular stable coin asset that Terra created is TerraUSD (UST). In addition, Terra is a blockchain that has smart contract capabilities and can support the construction of a DApps ecosystem on it.
Terra is a decentralized public blockchain with algorithms for stablecoins that aims to make Defi easily accessible to all users.
Terra wallet station
Furthermore, Terra station acts as a terminal hub to access services available on the Terra blockchain.
The Terra station dashboard displays information within the Terra blockchain environment, including LUNA prices, the number of LUNA issued, community pools, transactions, tax rewards, and wallets.
Through Terra station users can access history, wallet, NFT marketplace, Governance, swaps, stakes, and contracts.
To be able to access this service, users must connect a wallet, if they don’t have a Terra wallet, they must create a new wallet.
Terra has officially launched a wallet that can be used for the Terra Station application, there support wallets via the Terra Station wallet, wallet connect, or with ledger wallets, and XDefi wallet.
Terra station wallet supports desktop applications available for Windows, macOS, and Linux. Or more simply by using a browser extension for Google Chrome, or Firefox.
For the mobile platform, Terra wallet supports Android and iOS operating systems.
The important things that must be considered when creating a new wallet are to create a wallet name, then create a strong password, and write down the seed phrase on white paper and save it offline, at least it’s much safer than saving on a notepad, which is possible if a disk you are damaged you lose wallet access.
When your wallet is ready then go to Terra Station to connect your wallet. Since the new wallet does not have a balanced yet, the user must either purchase LUNA or send LUNA to the wallet.
What is TerraUSD used for?
TerraUSD is an interchain stablecoin that supports multiple scalable blockchains including Ethereum, and Solana.
TerraUSD can be used for payments in Defi projects, NFT, and the environment, this is a cash innovation that is unique compared to other stablecoins. The TerraUSD stablecoin is for internet payments, web3, loans, and pegged payment use cases.
Although the growth of TerraUSD itself was only launched in 2020, the high enthusiasm of users has increased the market capitalization of TerraUSD.
How to stake TerraUSD?
Staking LUNA can be done by becoming a delegate which does not require the responsibility to run the validator. Users only need to select a validator via Terra Station and stake LUNA according to the desired amount.
Because it is not possible to stake TerraUSD directly, because the Terra blockchain uses LUNA for network management and staking. Unless you find a validator that pays rewards using UST. So to get TerraUSD, you need to swap by sending LUNA to the system to get TerraUSD.
Is TerraUSD the same as USDT?
Both TerraUSD and USDT are stablecoins, their functions are also not much different for internet payments and money transfers.
The basic difference between the two is how the tokens are managed and minted.
TerraUSD is an algorithmic decentralized stablecoin, how one TerraUSD is minted is by burning one LUNA. Here there is no maximum supply number of UST to be printed, it all depends on market demand in the Terra protocol.
While USDT is a centralized stablecoin whose token management is managed by Tether labs which mint USDT and back it up with USD.
USDT and TerraUSD are pegged to the USD value, but the accuracy of the value is more accurate to UST than USDT, this is because high demand can cause USDT to be higher than USD and vice versa.
UST is considering more accurate because the Terra protocol algorithm balances demand and supply.
However, in terms of market capitalization, USDT is currently superior to UST. It may also be because USDT arrived earlier, while UST only appeared in 2020.
USDT is still the first stablecoin to lead with a cap of $82,890,596,716. While UST is third after USDC with a cap of $17,747,628,793
How to buy TerraUSD?
To buy UST, you have to create a Terra wallet through the wallet application for desktop, browser, or mobile. It will be easier if you already have a Terra wallet. You can import the wallet through the Terra Station application.
Through the Terra station dashboard, you can buy UST by clicking Buy to the right of the UST ticker. It will direct you to several exchange options, there are Binance, Huobi, Kucoin, and Bitfinnex. Or with flat currency through Transak, Kado Ramp, and Ramp.
Before buying UST you might consider the fees of each exchange to find the exchange with the lowest fee.
Binance’s first choice, it’s the largest exchange today, that offers discounts when using BNB. You should also make sure to comply with KYC for account verification on the exchange.
Once you have the funds, then buy UST on the exchange according to the available coin pairs. After successfully purchasing UST, you can send UST to Terra wallet.
How to sell TerraUSD?
How to sell UST, you can do it through an exchange, just like when buying UST. However, if you want to sell it and convert it to ETH, it may require additional steps and transaction fees. First is to sell UST to USDT, then with USDT to buy ETH.
You can also use the swap feature through Terra Station. But you can only swap with the available tokens, LUNA, AUT. CHT, CNT, DKT, EUT, GBT, HKT, IDT, INT, JPT, KRT, MNT, MYT, MOT, IPM, etc. The coin is a flat currency benchmark. Besides that, there are also various kinds of tokens such as mAPPL, mTSLA, mMZN, and many more.
Is TerraUSD a good investment?
TerraUSD is a stablecoin pegged to 1 USD. The stablecon price fluctuations are very different from common cryptocurrencies like Bitcoin, Ethereum, and so on. The low of UST was $0.7929 in December 2020, and an all-time high of $1.05 in January 2021.
If trading UST with USDT it is possible there is a difference in price changes, but because the range of the difference is small, the possibility of profit is also small, but it may be more profitable if the funds are large. Not deducted by transaction fees.
While analysis from Cointibuy, TerraUSD gets a safety rank of 2.8 with a target ROI of 1.2% with a potential price of $1.01.
In the long term, UST, which is pegged to a fiat currency, is considered safer from drastic price declines. While it is less profitable because the purpose of UST is for online payments, it is more suitable as a hedge.
Staking LUNA is more profitable if you find a validator that is more profitable than UST.
TerraUSD has become the largest decentralized stablecoin, although it still hasn’t surpassed USDT, TerraUSD’s growth is quite rapid with the support of the community.
UST for alternatives for cross-border money transfers at a low cost. Its interoperable nature supports various blockchains, TerraUSD is a money innovation for internet payments for both Defi and NFT projects.
Note: This article is for informational purposes only and does not constitute advice or a solicitation of investment. Forex, crypto CFD is risky, each investor is responsible for his/her investment.
You may like