Thread by @SteeTweets

⚠️Warning⚠️
Your stablecoin could lose its value.

Or become regulated by the FED.

The one exception: $UST

Here's what $UST is and how it works:

For background:

Stablecoins make up 75% of crypto trades.

The most popular stablecoins hold a $1 value, called a peg.

$UST has become the 4th largest stablecoin by market cap thanks to:

•how it maintains its peg ($1 value)
•its use case

Let's explore these:

How does $UST maintain its peg?

To understand $UST you must know about $LUNA and the Terra Blockchain.

Starting with $LUNA:
Without it there is no $UST stability.

Let me explain...

First, let's understand 2 words:
•Mint = add to supply
•Burn = take from supply

$LUNA has a mint/burn relationship with $UST every time $UST goes below or above $1.

Let's take a look:

Using station.terra.money/swap

When $UST is below $1:
You can burn 1 UST to mint $1 worth of LUNA

When $UST is burned, its price increases.

It also increases when there's more demand and people are buying $UST.

This leads to $UST's price going above $1...

When $UST is above $1:
You can burn $1 LUNA to mint 1 UST and then sell it outside of the Terra Station app to profit.

For this to work, $LUNA's price must be above $0 for the burn to stabilize $UST's price.

And the higher $LUNA's price, the better this works.

so...

$UST's peg relies on people using the mint/burn relationship...

And $LUNA's value.

"What gives $LUNA value?"

$LUNA's value comes from demand.

It's a governance token.
Meaning holders have a say on how to improve the terra blockchain.

Holders who stake $LUNA for $bLUNA with @anchor_protocol also receive:
•income from blockchain fees
•free tokens of new Dapps

Understand this:

@anchor_protocol Other burn/mint systems for stablecoins failed because of 1 key factor:

"Why do you want to hold these tokens?"

Terra solves this by developing an ecosystem around it, building reasons to hold $UST and $LUNA.

A robust ecosystem = A robust peg

"What's the Terra Blockchain?"

@anchor_protocol The Terra Blockchain is a bustling ecosystem that has around 150 Dapps.

This ecosystem brings demand to $UST and $LUNA through its many use cases that often involve making more money.

At its core, 3 Dapps have brought major adoption to Terra:

@anchor_protocol Terra's 3 core Dapps:

1 CHAI - Korean Payment System
2 @anchor_protocol - Staking, High Interest Savings and Loans
3 @mirror_protocol - Synthetic assets

The 4th largest DeFI Dapp right now is Anchor...

offering 19.45% interest for holding $UST.

That's insane demand.

Now...

@anchor_protocol @mirror_protocol You understand $LUNA maintains $UST's peg with a mint/burn relationship.

And Terra Dapps lead to:
•Increase $UST and $LUNA demand
•And a stronger peg

But...

We need to ask:
Does anything threaten this system?

To answer this, let's look at the history of $UST's peg:

@anchor_protocol @mirror_protocol In 2021, most of Jan and 8 days in May it struggled to hold a strong peg:
With a max slippage of 15¢

$LUNA's marketcap was over 33x smaller than it is now.

There were other factors, but the point is even back then it still recovered...

Here's the thing:

@anchor_protocol @mirror_protocol If people have faith in the Terra ecosystem.

If they see the value in holding $LUNA and $UST.

They have reason to maintain the peg.

Trust in the ecosystem creates incentive to act in the burn/mint system.

@anchor_protocol @mirror_protocol For now, $UST seems like a safe place to store your money.

And a great way to get a high 19.45% interest/year using @anchor_protocol

(Not Financial Advice)

@anchor_protocol @mirror_protocol I've only scratched the surface of this ecosystem.

If you want to have a deep dive, I have some resources to share.

But first, could you do me a favor?

RT the first tweet to help others understand how $UST keeps its value.

https://twitter.com/SteeTweets/status/1506621753258397705

@anchor_protocol @mirror_protocol To find out more about Terra, try these official resources:
@terra_money
terrablockchain.org
terra.money

$BTC is now also being used as collateral in worst-case scenarios:
investorplace.com/2022/03/terra-…

Learn more about Terra Dapps below.

@anchor_protocol @mirror_protocol @terra_money My friend @trader_fugazi also has useful insights into Terra DeFI plays.

And I found this mega thread you can use to see the many ways to make money on The Terra Blockchain.

https://twitter.com/eeyernlee/status/1501715114604433408