The TerraUSD Stablecoin Lunacy Explained

One of the more ironic parts of the crypto space over the past few years has been stablecoins. Crypto is a bet on dollar (and other fiat currency) devaluation, yet stablecoins choose to peg and therefore derive their value from the dollar. What? It’s pretty silly stuff. Stablecoins were supposedly dreamed up to give crypto investors a less volatile option for their portfolios. But there already exists one — the U.S. dollar or gold or TIPS (inflation protected securities). Or if you’re worried about the U.S. and its debt shenanigans, get some Swiss Francs. Instead, because slapping the blockchain (and defi) label on anything seemed to make it super trendy and cool, stablecoins took off. Stablecoins claim to be backed by the dollar — i.e. they hold dollars in reserve (similar to how a gold standard currency works). This means that in theory one stablecoin could always be exchanged for one U.S. dollar no matter what was going on, providing a floor price and target value for the stablecoin. And like all parts of the crypto and blockchain space, the stablecoin space has its serious players and its jokers. Some like Tether seem to actually be backed by real dollars (though many claim that the amount of Tether outstanding is significantly more than the amount of dollars and other assets held in reserve). Then we have the jokes, UST (TerraUSD) and Luna, which are part of the Terra blockchain. <a href="https://medium.com/alpha-beta-blog/the-terrausd-stablecoin-lunacy-explained-cd290e326b47">Visit Now</a>