TerraClassicUSD Staking

TerraClassicUSD (USTC) is the decentralized and algorithmic stablecoin of the Terra blockchain. It is a scalable, yield-bearing coin that is value-pegged to the US Dollar. TerraClassicUSD was created to deliver value to the Terra community and offer a scalable solution for DeFi amid severe scalability problems faced by other stablecoin leaders like Dai.

TerraClassicUSD is an algorithmic stablecoin, where the cost of minting is equal to the face value of the stablecoins minted — in order to mint 1 TerraClassicUSD, only $1 worth of the reserve asset ($LUNC) must be burned. TerraClassicUSD monetary policy is infinitely scalable — helping DeFi apps and protocols achieve their full potential without restrictions.

TerraClassicUSD was founded by Terraform Labs lead Do Kwon. He cofounded Terra to use blockchain technology to develop a more efficient payment system. Do studied Computer Science at Stanford, was an engineer at Apple and Microsoft, and brings his expertise in distributed systems from his previous startup, Anyfi.

In the fall of 2020, the team launched TerraUSD (UST) with Bittrex Global, and announced plans to take it interchain to every major blockchain, starting with Ethereum and Solana. (TerraUSD launched on September 12 2020 on Bittrex Global).

USTC de-pegged on the 10th of May 2022 and subsequently never returned back to peg.

Nansen analytics conducted an on-chain investigation which revealed that a small number of players identified vulnerabilities early into the UST de-peg, specifically in the relatively shallow liquidity of the Curve pools securing TerraUSD (UST)’s peg to other stablecoins, and moved to exploit these by:

1. Withdrawing UST funds from the Anchor protocol on Terra

2. Bridging these funds from Terra to Ethereum via the Wormhole infrastructure

3. Swapping significant amounts of UST to other stablecoins in Curve’s liquidity pools

4. During the de-pegging process, likely arbitraging inefficiencies between various pricing sources (Curve, decentralized exchanges, and centralized exchanges) by buying and selling positions between CEX and DEX markets.

The de-peg of UST could  have resulted from the investment decisions of several well-funded entities, e.g. to abide by risk management constraints or alternatively to reduce UST allocations deposited into Anchor in the context of turbulent macroeconomic and market conditions.

It is unclear if USTC will ever return to $1 as there are still ongoing governance proposals that will decide the future of  ‘stable’ coin