UST

UST, or TerraUSD, was an algorithmic stablecoin launched by the Terra blockchain to maintain a 1:1 peg to the U.S. dollar. Unlike traditional stablecoins backed by fiat reserves (e.g., USDT or USDC), UST relied on a mint-and-burn mechanism tied to Terra’s native token, LUNA.

To issue UST, an equivalent value of LUNA would be burned, and conversely, UST could be burned to mint LUNA. This system was designed to keep UST stable by balancing supply and demand.

However, in May 2022, UST lost its dollar peg during a market crisis, leading to its collapse and the hyperinflation of LUNA. This event wiped out billions of dollars in value and had significant repercussions across the crypto industry, highlighting the risks of algorithmic stablecoins.