Terra’s stablecoin UST is quickly emerging as a major competitor in the DeFi arena, swimming among the sea of centralised tokens like Tether’s USDT and Circle’s USDC. DeFi space is embracing the UST enthusiastically, and new protocol integrations are appearing quicker than anyone can keep up with, propelling UST beyond decentralised rival DAI.
In this article, we will try to understand what Terra and UST are and also take a look at Terra and UST’s recent progress. We will look at what can we anticipate from the stablecoin and the larger Terra Luna ecosystem in the future.
Terra recent rise to popularity
To begin with, UST has gained significant traction among more casual stablecoin holders looking to maximise their yield potential while balancing platform risk. In recent months, many have opted to Terra’s Anchor Protocol for just that.
Anchor has given a steady 19.5 percent continuously compounding return on UST, other CeFi alternatives like Celsius or BlockFi have been less aggressive in stablecoin rates. In December, Celsius, for example, dropped their stablecoin return rates from about 10% to roughly 8.5 percent.
What is Terra and UST?
Terra has developed a next-generation blockchain payment network for the growing Asian e-commerce sector. It aims to increase payment service providers’ efficiency while also increasing customer value. Terra assisted in the formation of an e-commerce alliance with 15 initial partners. It represents a combined Gross Merchandise Value (GMV) of $25 billion and a 45 million-strong client base.
Terra works on the Cosmos blockchain technology and aims to compete with existing retail payment apps. Terra manages to sidestep the whole existing fragmented payment infrastructure as a full end-to-end payment solution. Terra’s technology has the potential to save payment service providers millions of dollars each year under this arrangement. Terra distinguishes itself from competitors by offering lower transaction costs, ranging from 0.5 to 2%, compared to the industry standard of 2.5 to 3%. Anchor, Pylon, and Mirror Protocol are part of this ecosystem.
Terra’s partners use Terra stablecoins, UST to allow the usage of Terra’s network for retail payment services. Stablecoins are cryptocurrencies whose value ties to another cryptocurrency, fiat currency, or exchange-traded commodities. The exchange-traded commodity can be precious metals or industrial metals. Terra’s stablecoins provide smooth transactions and fiat currency stability.
Learn more about Terra, Luna and UST- Luna: The Shiny New Coin
Platform and protocol integrations are being added at a rapid rate. This week, the NEAR Protocol started supporting the UST. Moreover, Binance also rang in the Christmas season with new UST support for BTC, USDT, and BUSD trading pairings. Furthermore, UST continues to discover new protocol integration throughout the traditional DeFi landscape: Abracadabra.money is generating a lot of buzzes lately. It is a new “degenbox,” a yield-generating method that enables users to leverage their stablecoin UST with Abracadabra’s now-famous Magic Internet Money (MIM).
Of course, we can’t forget Astroport. It is a Terra-native Automated Market Maker (AMM). Although still in its early phase it has already received over $1 billion in capital inflows. These advances have resulted in record highs for Terra’s native platform token, LUNA. With each UST generated, LUNA incurs $1 USD in the burn, making it an elastic (though recently deflationary) token.