What is TerraUSD?

TerraUSD (UST) is an algorithmic stablecoin created by Terra in September 2020. Terra built TerraUSD with a scalable monetary policy, passive income potential through the Anchor lending protocol, and interoperability with multiple blockchains. The stablecoin’s minting policy makes it possible for DeFi (decentralised finance) solutions to adopt it without losing scalability.

A brief history of TerraUSD

The Terra blockchain is powered by its native LUNA token and the TerraUSD token (UST). TerraUSD was created by South Korea's Terraform Labs co-founders Do Kwon and Daniel Shin and released on Bittrex Global in September 2020. It is a decentralised stablecoin that runs on Ethereum with the aim to solve issues typically related to stablecoins, such as scalability and interoperability. Since its launch, it has quickly gained a reputation for being one of the more reliable and stable cryptocurrencies in the DeFi space.

In February 2022, Luna Foundation Guard (LFG), a non-profit organisation supporting the growth of the Terra ecosystem, announced that it had just completed a private LUNA sale in an effort to maintain the stability of the TerraUSD stablecoin. The sale raised a total of US$1 billion - the largest to ever occur in the crypto space at the time.

How TerraUSD works

TerraUSD’s algorithm dictates that the cost of minting is equal to the face value of the stablecoins being minted. In order to mint one TerraUSD, only $1 worth of Terra’s reserve asset LUNA must be burned. This mechanism differentiates TerraUSD from other stablecoins, which are backed by 1:1 US dollar reserves. Terra says that its TerraUSD monetary policy is infinitely scalable — helping DeFi apps and protocols achieve their full potential without restrictions.

What is TerraUSD used for?

TerraUSD can be used either in connection with LUNA, Terra’s reserve currency, or as a standalone token. Aside from being used for liquidity in DeFi solutions, TerraUSD can also be used in the Anchor lending protocol with a 20% return on savings.