Terra’s stablecoin, UST, has climbed to fourth position in terms of market capitalization, surpassing DAI, its stablecoin equivalent produced by MakerDao, the industry’s oldest decentralized stablecoin. In September 2020, Terra, a layer 1 smart contract-enabled network built with the Cosmos software development kit, debuted UST. The LUNA governance token, which is presently the 4th largest layer 1 blockchain, is part of Terra’s ecosystem. By surpassing DAI as the most popular ‘decentralized stablecoin,’ or one supported by cryptocurrencies rather than fiat assets, UST has now overtaken DAI as the most popular ‘decentralized stablecoin,’ or one backed by cryptocurrencies rather than fiat assets. DAI has a market value of $8,969,084,150, while UST has a market capitalization of $9,216,965,278.
With a market size of $77.1 billion, Tether (USDT) is the most valuable stablecoin, while USD Coin (USDC) is the second most valuable stablecoin with a market valuation of $41.9 billion. Centralized entities are in charge of administering and maintaining both assets. USDT and USDC are backed by a pool of resources that comprise conventional instruments such as US depositories, cash, and corporate securities, to mention a few. BUSD looks to be backed up 1:1 by cash created by Paxos, a cryptocurrency firm.
Users can create DAI by pledging various cryptocurrencies as collateral, similar to borrowing money against equities. However, minting DAI implies that the collateral deposited is more than 100% of the DAI utilised. To utilize only $1 of DAI, you’d need between $1.30 and $1.70 in Ethereum, depending on the vault.
Terra’s UST is minted similarly, except that users can only create more UST by “burning” (destroying) LUNA, Terra’s native token responsible for paying transaction fees and participating in governance.