What is TerraUSD (UST)?
TerraUSD, abbreviated UST, is a stablecoin that always equals the value of the US dollar. This means that the value of UST will never rise or fall, allowing this stablecoin to be used for a variety of situations. However, UST is not backed by the US dollar. Instead, the value of UST is maintained by LUNA tokens.
What is a stablecoin?
A stablecoin is a crypto currency that always has the same value. The stablecoin can be linked to any financial product, although in most cases it is a fiat currency such as the euro or US dollar.
Stablecoins are incredibly popular and important to DeFi. This is because stablecoins can be used for many situations. For example, you can protect your assets from the volatility of other crypto currencies. If you have made a profit on a trade, and then sell the crypto currency for another crypto currency, your profits could evaporate when the value of this currency drops.
Stablecoins are also useful for having equity on a crypto exchange when you cannot hold fiat currency. Often it is not possible to have euros as a balance in your account. You can then buy stablecoins that serve as a balance and thus wait until the perfect buying moment arrives.
What is TerraUSD (UST)?
TerraUSD (UST) is the stablecoin that runs on Terra's blockchain. This stablecoin was also developed by the same company.
The value of TerraUSD is always equal to the US dollar, although the value is not backed by the dollar. Instead, the value is kept equal by an algorithm developed by Terra. This algorithm uses LUNA tokens to keep the value of UST stable.
The algorithm Terra uses is called Seigniorage. The value of LUNA is used to keep UST always worth one dollar. The moment the demand for UST increases, there will also need to be more LUNA tokens to keep the value the same.
When this is the case, people can exchange their UST for LUNA. They can do this at an attractive rate, encouraging users to swap their tokens. The same happens the other way around: when there are too many LUNA tokens relative to the demand for UST, people will be encouraged to swap their LUNA tokens to UST. Terra will at that time burn the LUNA tokens by sending them to the community pool. The tokens in this pool will be used for Terra's continued development.
Terra's blockchain uses the Proof of Stake (PoS) consensus mechanism. The computers in the network will have to adhere to these rules in order to be active. With Proof of Stake, the network consists of validators, who are chosen to validate transactions and create new blocks. This makes UST a fairly durable crypto currency, compared to cryptocurrencies that run on a Proof of Work (PoW) blockchain, such as Bitcoin.
Who is the founder of TerraUSD?
TerraUSD was founded by the same man behind the Terra protocol: Do Kwon. The company is called Terraform Labs and was founded in January 2018. Terraform Labs is South Korean, but is headquartered in Singapore.
Before Do Kwon founded Terraform Labs, he was the founder and CEO of Anyfi. This was a company in South Korea that developed and could implement blockchain solutions for businesses.
What are the pros and cons of TerraUSD?
Below you will read about the main advantages of TerraUSD (UST).
- TerraUSD stablecoin allows you to protect your assets on a crypto exchange from the volatility of cryptocurrencies whose value is not linked to a financial product.
- TerraUSD is protected by LUNA tokens. This happens fully automatically based on an algorithm. Because LUNA was also developed by the team behind TerraUSD, the token will always be protected enough.
- Users can make money with LUNA and UST by swapping these two tokens for each other.
- Every 6 seconds, a new block is added to Terra's blockchain, so you can make a transaction with UST incredibly fast.
- In most cases, it costs no more than 5 cents to make a transaction with UST.
- UST has many competitors, such as BUSD, USDC and USDT. They keep the value of stablecoin active in a different way than TerraUSD. However, Maker does this in the same way with the DAI.
- There is always a risk associated with swapping LUNA and UST, as this is done fully automatically by smart contracts.
Where can you buy TerraUSD (UST)?
TerraUSD (UST) can be purchased on Coinmerce's crypto exchange. If you have an account, you will have purchased the UST stablecoin within a few clicks. Don't have an account yet? Click here [LINK] to create an account at Coinmerce.
At Coinmerce, you can buy UST with iDeal, SEPA, GiroPay, Sofort, EPS and MyBank. It is also possible to buy UST with CM-tokens. These are stablecoin tokens from Coinmerce that are linked to the value of the euro.
Where can you store UST?
UST is stored in a wallet that supports this type of token. If you purchased UST from Coinmerce, you can store UST in Coinmerce's hot wallet. This wallet is secure and Coinmerce keeps most of it in cold storage. This means that the crypto coins are stored offline.
It is also possible to send UST tokens to another wallet, such as your own hardware wallet. To do this, however, you must first verify your wallet address with Coinmerce, after which you can send your TerraUSD to this address.