A few weeks ago, we launched TerraUSD (UST) with Bittrex Global, and announced plans to take it interchain to every major blockchain, starting with Ethereum and Solana. While there are already many USD stablecoins, the recent spike for stablecoin demand on DeFi proved that none are sufficiently scalable to help blockchain ecosystems scale.
TerraUSD is the first decentralized stablecoin that is scalable, yield bearing and interchain. We are excited to bring TerraUSD to many ecosystems and apps, and help DeFi finally scale.
Dai is the most widely used decentralized stablecoin on Ethereum, but it has severe issues scaling, due to a supply-demand mismatch in its monetary policy.
- Dai is supplied by users looking to gain leveraged exposure to ETH and ERC-20 assets
- Dai is demanded by users looking to gain access to USD-denominated store of value on-chain
This mismatch creates issues when the demand for stability outstrips the demand for asset leverage on Ethereum. Most recently, the use of Dai in many DeFi protocols has led to a massive surge in the demand for Dai (unmatched by demand for leverage), leading to perverse situations where Dai trades at a significant premium to the Dollar, and the Maker Foundation to resort to emergency measures to try to restore the peg:
… leaving many DeFi users dissatisfied with Dai’s scalability issues:
Dai’s scalability problem extends to all other stablecoins on Ethereum where the cost of minting is greater than the face value of the assets minted. The money supply is bounded by the willingness of the market to suffer excess capital cost (e.g. demand for leverage) that is not correlated with the demand for the stablecoin. Handicaps in Dai monetary policy, in turn, bounds the growth and adoption of DeFi.
TerraUSD is an algorithmic stablecoin, where the cost of minting is equal to the face value of the stablecoins minted — in order to mint 1 TerraUSD, only $1 worth of the reserve asset ($LUNA) must be burned. TerraUSD monetary policy is infinitely scalable — helping DeFi apps and protocols achieve their full potential without restrictions.
While TerraUSD is brand new, its Korean Won pegged cousin TerraKRW (and MNT pegged stablecoin TerraMNT) has been exploding in growth and adoption in Korea, and is today the most actively adopted stablecoin by usership. TerraKRW powered payment solutions are expanding into e-commerce checkouts in Asia, empowered by lower transaction fees made possible by bypassing settlement networks (- 40–50%) and faster settlement times (Asia avg. 7 days vs 6 seconds for Terra).
- Chai is the fastest growing e-wallet in Korea, with more than 2M active users and 1.2B in annualized transaction volume after less than 16 months of operations. It is widely integrated with the leading ecommerce merchants in Korea, and expanding offline in 2020 through the Chai top up debit card and offline retail integrations (e.g. CU, largest convenience store chain).
- MemePay is a e-wallet in Mongolia used by ~ 1.5% of the online population in F&B and retail locations in Ulan Batuur. (https://www.coindesk.com/stablecoin-startup-terra-expands-to-mongolia-with-taxi-payment-service)
Thanks to its exploding adoption in payments, Terra now has the third highest number of transactions of all blockchains (after BTC and Ethereum) and is generating 16M USD in fees annually.
All Terra stablecoins share liquidity — TerraUSD can be swapped to TerraKRW (and visa versa) on-chain with negligible fx fees. TerraUSD will build on KRT’s proven track record and liquidity to bring DeFi to millions of users.
Last month, we announced the upcoming launch of Anchor, a savings protocol offering stable yield on Terra stablecoins.
While lending markets on USDC and Dai has allowed for users to earn yields on stablecoins, rates have been highly volatile as they are powered by the cyclical speculation of underlying tokens. When the borrowing demand for ETH is high, the interest rate goes up, and when the demand is low, the interest goes down.
Anchor yield is powered by block rewards by the entire universe of PoS chains, most of which have steady block rewards via transaction fees and inflation, leading to a much more dependable APR. Most importantly, Anchor yield is uncorrelated with market sentiment (not driven by leverage), and will be a valuable counterweight to the speculative mania in the rest of DeFi.
TerraUSD will soon be the first censorship-resistant dollar to offer a savings experience competitive with the traditional savings account through Anchor.
While stablecoins have proven themselves to be a valuable user onramp and primitive for decentralized applications, very few chains outside of Ethereum have ready availability of stablecoins, limiting a vibrant application ecosystem from forming on these chains.
In a few weeks, we will be unveiling a new bridging protocol, Dropship, that will allow Terra stablecoins to migrate from the Terra mainnet to other blockchains.
Dropship will first move TerraUSD to Ethereum and Solana to be integrated in popular DeFi apps and DEXes.
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