TerraClassicUSD

TerraClassicUSD (USTC) is a decentralized algorithmic stablecoin that was originally known as TerraUSD (UST). It was created on the Terra blockchain and was designed to be pegged to the value of the US dollar. The Terra blockchain was an open-source platform that enabled users to instantly spend, save, trade, or exchange UST.

TerraUSD was launched in September 2020 in collaboration with Bittrex Global. It was intended to be a scalable, yield-bearing stablecoin that could be used in DeFi protocols without losing scalability. UST was minted by burning LUNA, Terra's non-stablecoin cryptocurrency, and could be swapped for LUNA. This minting mechanism was designed to maintain price stability by controlling the supply and demand of UST and LUNA through arbitrage trading efforts.

In May 2022, a large amount of UST was dumped into the market, causing a sudden drop in the UST price and leading to its depegging from the US dollar. This event triggered a panic among investors, who sold more UST and minted more LUNA, resulting in a drastic increase in LUNA's supply and ultimately causing the crash of LUNA. The Terra team responded by announcing a hard fork to the Terra blockchain, which led to the rebranding of the original Terra blockchain as Terra Classic and the renaming of TerraUSD to TerraClassicUSD (USTC).

As of January 2024, TerraClassicUSD has a market capitalization of around $144 million and a circulating supply of approximately 6.8 billion USTC. It can be bought, sold, and traded on exchanges, but it is no longer pegged to the US dollar and is now considered a store of value.

TerraClassicUSD (USTC) is a decentralized algorithmic stablecoin originally designed to maintain a 1:1 peg with the U.S. dollar. It operates on the Terra Classic blockchain and was previously known as TerraUSD (UST). Here's how it works:

USTC uses a "mint and burn" algorithm to control its price. This mechanism involves the interaction between USTC and its native asset, LUNA (now known as LUNC). The algorithm works as follows:

• When USTC's price is below $1: Users can burn 1 USTC and receive $1 worth of LUNC. This reduces the USTC supply, which should drive the price up.
• When USTC's price is above $1: Users can burn $1 worth of LUNC and receive 1 USTC. This increases the USTC supply, which should drive the price down.

This mechanism relies on arbitrage trading efforts to maintain price stability. However, in May 2022, a large amount of USTC was dumped into the market, causing a sudden drop in price and leading to the depegging of the stablecoin. This event led to a hard fork of the Terra blockchain, and USTC was rebranded as TerraClassicUSD (USTC).

After the depegging, USTC lost its stablecoin status and is now considered a store of value. It can be bought, sold, and traded on exchanges. The total supply of USTC exceeds 10 billion, with over 9.8 billion tokens in circulation. Despite efforts to recover, USTC has not regained its peg to the U.S. dollar and currently fluctuates in value.

• Decentralized: USTC operates on the Terra Classic blockchain, which is decentralized and open-source.
• Algorithmic: Unlike standard stablecoins that use reserves to maintain their peg, USTC uses a mathematical equation to control its price.
• Dual Token System: USTC was part of a dual token system with LUNC, which helped create and stabilize the stablecoin.

USTC can be traded on various exchanges, including MEXC, where it can be bought and sold using different trading pairs, such as USTC/USDT.

TerraClassicUSD (USTC) has several strengths:

1. Algorithmic Stablecoin: USTC is designed to maintain a peg to the US dollar through algorithms, which helps to stabilize its value.

2. Decentralized: USTC operates on the Terra Classic blockchain, ensuring a decentralized system for its users.

3. Accessibility: USTC is supported by major exchanges like Binance and KuCoin, making it easily accessible to users.

4. Community Support: The Terra Classic community has actively participated in decision-making processes, such as the vote to halt minting USTC, demonstrating a strong community backing.

5. Potential for Recovery: Despite its current struggles, USTC has shown signs of recovery, and some predictions suggest it could regain its peg in the future.

These strengths highlight USTC's potential for stability and its ability to adapt to changes in the market.

TerraClassicUSD (USTC) carries several risks that investors should be aware of:

1. Volatility: The cryptocurrency market is known for its high volatility, which can lead to sudden and significant price changes. This volatility can result in substantial losses for investors.

2. Unregistered Security: The United States Securities and Exchange Commission (SEC) has listed USTC as an unregistered security, which can lead to legal issues and potential penalties.

3. Legal Issues: The founder of Terra, Do Kwon, is facing allegations of a $40 billion cryptocurrency fraud and is set to be extradited to the United States or South Korea. This ongoing legal battle can impact the stability and value of USTC.

4. Market Manipulation: USTC's low trading volume and market capitalization make it susceptible to market manipulation, which can lead to artificial price movements.

5. Lack of Trust: The collapse of Terra in 2022 led to significant losses for investors, which has resulted in low investor sentiment and concerns about the trustworthiness of USTC.

6. High-Risk Investment: Cryptocurrencies, including USTC, are generally considered high-risk investments due to their inherent volatility and potential for significant losses.

These risks highlight the importance of thorough research and careful consideration before investing in TerraClassicUSD (USTC).

• Do Kwon: Co-founder of Terraform Labs, the startup behind TerraClassicUSD (USTC). He is also the founder of Terraform Labs and was involved in the creation of TerraUSD (UST).
• Daniel Shin: Co-founder of Terraform Labs and involved in the creation of TerraUSD (UST).
• RedlineDrifter: A pseudonymous community member who proposed a divergence fee mechanism and staking tool to help revive USTC.
• Shaurya Malwa: Deputy Managing Editor for the Data & Tokens team at CoinDesk, focusing on decentralized finance, markets, on-chain data, and governance across all major and minor blockchains. He has written about Terra and USTC.