Algorithmic stablecoins have been going through rapid growth and innovation in the past year. Today, let's take a look at UST, a stablecoin by @terra_money, now the 5th largest by market cap and its mechanics.

Our analyst @NeBB399 prepared a report on UST.
A thread below 👇👇
Since UST's genesis in Sept 2020, it has grown to $2b in circulation. To put things in perspective, Tether is 30x larger with $60b in circulation. UST's growth has been strong and it is larger than other stablecoins such as TUSD, PAX, sUSD, and many more.
Unlike other stablecoins, UST does not hold collateral and is issued when traders burn LUNA. It maintains its peg via arbitrage. When 1 UST < $1, UST holders may exchange 1 UST for $1 worth of LUNA, and vice versa. LUNA's supply expands and contracts with UST's issuance.
Terra is a native blockchain that is a part of the Cosmos ecosystem and utilizes Proof-of-Stake. There are 100 validators securing the network and validators have to stake their LUNA or have LUNA delegated to them. Staked LUNA requires 21 days to be unstaked.
UST has held its peg relatively well even with the recent market crash which saw LUNA went from $22 to $4.30. Many other algorithmic stablecoins (such as ESD, DSD, BAC, etc) have lost their pegs a long time back.
We believe that UST has been successful because of two main reasons:
- LUNA validators help stabilize the UST peg
- Real demand for UST
UST is not issued as a standalone stablecoin on an existing blockchain but is a core component of the Terra blockchain. LUNA validators cooperate together for security and stability as they have invested significant resources. The 21 days lockup period also helps with stability.
But more importantly, and this is where most stablecoins don't succeed, is the use-cases of UST. Terra has an entire ecosystem built facilitating demand for UST. Projects such as @mirror_protocol and @anchor_protocol spur UST demand. It also generates demand in offline channels.
If you are interested in reading the full 18-page report written by @NeBB399, click on the link below:

Benjamin also prepared a thread summarizing his report too:
Disclosure: I don't currently hold any LUNA position because I'm still waiting for @FTX_Official to support Spot trading. FTX only supports Perpetual trading now.

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More from @bobbyong

18 Apr
1) This weekend, I had the chance to catch up with an old roommate from my student days in London. I was telling him how he should have some crypto exposure on his portfolio and hold for the long-haul (>5 years).
2) He used to have some BTC/ETH from 2017 but doesn't want to trade a lot as doing crypto taxes is a big pain. Fair point on simplifying tax paperwork at the end of the year. He is in several chat groups with friends and they talk about rotating in/out from all kinds of shitcoins
3) I told him crypto investing is simple. Have a long time horizon and cut off all the noise. Choose an exposure between 1-10% of net worth that you are comfortable with, invest only in BTC and/or ETH, and remove all noise on all other shitcoins. Everything is correlated with BTC
Read 10 tweets
7 Feb
I have been fascinated by this NFT project, @TheHashmasks since its launch one week ago. I think it is one of the best executed projects so far and contains many interesting Easter Eggs, some yet to be discovered, and will continue surprising us in the days and weeks to come.
Here's a summary of what it is so far:
Hashmasks was launched on 28 Jan 2021 and is a digital art created by 70 (still) unknown artists globally. A total of 16,384 digital art were represented as Non-Fungible Tokens (NFT) on Ethereum and hosted on IPFS (decentralized storage).
I really like that the team chose to distribute these NFTs fairly. No one knew which NFT they will get during the initial sale. Price was set on a bonding curve. The first 3000 NFTs were sold for 0.1 ETH and the price went up till the final 3 NFTs were to be sold at 100 ETH each.
Read 19 tweets
6 Feb
Hate to say this but the current high gas costs on Ethereum has made it no longer welcoming to beginners or small account holders. It is now no longer economically feasible for small transactions to take place on Ethereum leaving only whales to make on-chain transactions.
When we first started using DeFi apps, it costs only couple of dollars for gas. Now, it costs $30-100 for smart contract interactions. No one starting out will want to spend this much money just to learn and will in fact have a very negative experience of this "future of finance"
We need Layer 2 solutions to go live asap or we will see either:
(a) more ETH DeFi apps planning to migrate to other Layer 1 chains like Solana and Polkadot, or
(b) competing DeFi apps launch on other Layer 1 chains that will pull new users away from ETH.
Read 4 tweets
3 Jan
Algorithmic stablecoins have been one of the most exciting parts of crypto recently. The design space is wide and there have been many innovations taking place. I have been following FRAX closely and want to take an opportunity to share my learnings here
FRAX is a decentralized stablecoin where its target peg is $1. Unlike over-collateralized crypto stablecoins like Dai and sUSD, it aims to be capital efficient by using fractional reserves via a 2 token model. Its other token is Frax Share (FXS)…
Each FRAX is backed by USDC & FXS. The percentage of USDC & FXS backing FRAX is determined by a collateral ratio adjusted algorithmically each hour. FRAX started off with a 100% USDC collateral ratio. At this point in time, FRAX is backed 90.75% with USDC with the remainder FXS.
Read 18 tweets
30 Dec 20
2020 has zoomed by so quickly and it's time for me to give my predictions on the crypto markets in 2021. So here we go my predictions on what I think will take place next year:
1/ BTC will have a very strong year driven by institutional demand. We have broken past ATH so all eyes will be on log price chart with next line of $100k. More public listed companies will hoard >$100m BTC. One small central bank will start holding BTC. Bitcoin ETF will launch.
2/ ETH will break past its $1,500 ATH mainly driven by DeFi. Gas fees will skyrocket again and highlight scalability issues. Most of the year will be spent coordinating on a Layer 2 scalability solution. My bet will be on ZK Rollup gaining traction towards the end of the year.
Read 9 tweets
10 Dec 20
1/ Just read @iearnfinance quarterly report here:…

Impressed with the transparency shown by the team and it's something that more teams should emulate. Particularly like the detailed list of Treasury and payments to contributors/grants.
2/ The report makes it easy to do research on projects.

Here's a short summary: Yearn made a total of $3.8m in net operating profits for the past 3 months ending Oct 2020. $2.5m were paid to stakers in governance contract.

Would have been good to see average staked amount.
3/ 95% of revenue came from yVault products of which yUSD is the most popular yVault generating 68% of vault revenue.

There is no mention of TVL in this report and I have to dig elsewhere to get this info. Would have been good for this info to be included.
Read 5 tweets

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