What is UST
TerraUSD (UST) is an algorithmic stablecoin pegged 1:1 to the value of the U.S. Dollar, created by Seoul-based decentralized payments provider Terraform Labs, developer of Anchor decentralized finance (DeFi) protocol. As a stablecoin, the cost to mint UST will always equal the face value of UST. TerraUSD is a Proof-of-Stake (PoS) coin using a SHA-256 algorithm, maintaining its peg to USD using a seigniorage system where the supply of each UST is regulated by the governance token LUNA. When demand for UST increases past a threshold, new UST is issued to be purchased for $1 in LUNA. This mechanism allows arbitrageurs to buy UST at below market price, selling the UST immediately for profit. When demand weakens for UST, LUNA is released to the market and exchanged for UST to be burned thus raising the price of UST. Validators on the Terra network stake LUNA to mint bLUNA token. Terra validators are rewarded as oracle providers for the price of USD in LUNA. Validators also earn a percentage of fees on transactions in UST.
