To discuss this topic, let’s first understand what a stablecoin is. There are a few of the most popular stablecoins in the market at present. The first element is USDT. Tether claims that each USDT corresponds to a dollar of cash reserves. At one point we thought USDT would go wrong because history has repeated itself.

In 1934, it was confirmed by various countries that the US set 35 dollars equal to the official price of one ounce of gold, and the gold content of each dollar was 0.888671 grams of gold. Central banks of various governments can exchange U.S. dollars for gold at market prices in the United States, which means that the value of the U.S. dollar is equivalent to gold.

However, the system itself has flaws, and if the US dollar is to be used as an international means of payment and the cash reserve of other countries, the value of the US dollar must be very stable, so that it can be accepted by other countries in international payments. The stability of the value of the dollar not only requires the United States to have sufficient gold reserves, but also requires the United States to maintain a surplus in international payments, so that gold continues to flow into the United States and increase the gold reserves of the United States. Otherwise, other countries are reluctant to accept US dollars in international payments.

On the other hand, in order for the world to obtain sufficient foreign exchange reserves, it is necessary for the United States to maintain a large deficit in the balance of payments. Otherwise, the world will face a shortage of foreign exchange reserves and a shortage of means of international payment in the channels of international flows. However, as the deficit of the United States increases, the gold guarantee of the dollar will continue to decrease, and the dollar will continue to depreciate. After the Second World War, the shortage of US dollars to the flood of gold was the inevitable result of the development of this contradiction. In addition, the frequent outbreak of economic crises between the US dollar and the United States, and the war caused the United States’ gold reserves to continue to decrease. Inflation is also accelerating, and the balance of payments continues to run a deficit.

In July 1971, the seventh U.S. dollar crisis broke out. On August 15, the Nixon administration announced the implementation of a new economic policy and stopped fulfilling the obligation of foreign governments or central banks to exchange U.S. dollars for gold in the United States. Since then, the dollar and gold have been decoupled. Last year, the United States began investigating Tether’s cash reserves. I once thought that USDT would collapse immediately, but everyone has seen the fact that USDT is still the largest stablecoin in circulation. Why is this?

Isn’t the release of USDT just against the country? How can the coinage be controlled by Tether? Don’t you find it strange? In fact, USDT is mainly anchored to the US dollar. If USDT is anchored to gold, I believe that Tether will never see the sun tomorrow, because USDT is anchored to the US dollar. Now that the inflation of the dollar is so severe, the United States urgently needs a reservoir to undertake these bubbles. Although USDT is banned in other countries, USDT can be used as a good reservoir for USD, and USDT is a smart contract. It has a blacklist. What did he want to do in the early days? What is this blacklist used for? Everyone knows that uninstalling this blacklist can be used by the government as a tool for government takeovers. However, because the issue of USDT’s cash reserves has been questioned, TEDA has not disclosed the financial report of its real cash reserves. Although USDT is still the largest cryptocurrency in circulation among stablecoins, the market is slowly beginning to favor USDC. USDC is actually no different from USDT. It also requires a dollar of cash reserves behind each additional USDC. However, unlike USDT, there are many institutions behind USDC that endorse it, such as coin base, and USDC is endorsed every month. They will disclose their financial reports. Compared with USDT, USDC is more transparent.

Unlike USDC and USDT, fiat currency as a guarantee jungler is an algorithm. DAI is a stable currency, a decentralized stable currency, which can exchange one dollar of DAI for every dollar worth of Ethereum by staking assets like eth.

Of course, the algorithm is not that simple, and usually it may require more than a dollar worth of Ethereum to be mortgaged to mint a dollar of DAI. But in order to facilitate understanding, it is good to simply think of it this way. When the price of ETH rises, you can mint more ETH, and when the price of ETH falls, your mortgaged ETH may be liquidated. People who use the past centralized lending projects should not Difficult to understand. Compared with these mainstream stablecoins above, the emergence of LUNA seems to have created a new gameplay for stablecoins. The focus of this issue is to see why his LUNA economic model can reach the top ten in terms of market value. The top ten projects in terms of market value are basically monster-level.

How does TERRA work? UST is a token in TERRA production, one UST is benchmarked against one dollar, it is a stablecoin on the TERRA chain, and the price of one dollar depends on how many people want it and how much UST is available.

You can understand the economy of TERRA as the amount of water stored in a pool depends on the supply of UST. The more people want to use UST, the higher the amount of water in the pool, that is, the market value. If the demand for UST drops, the amount of water in the pool will decrease, the market value will drop, and the level of water will represent the value of UST.

When UST follows the official introduction of TERRA, you can use it as a means of payment in daily life. For example, you can use it to buy coffee, or to carry out some financial activities, so that more and more people want to use it. UST, its price will also go higher. But it’s a stablecoin after all, and it’s definitely against a dollar, so in order to get its price back to a dollar, they’ll increase the supply of UST.

But where did the newly added UST come from? TERRA has invented an exchange mechanism that can exchange LUNA for equivalent UST. Investors can hold LUNA if they see a broader future for UST. When the value of UST exceeds one dollar, the holder will exchange LUNA for UST, and then exchange UST for more dollars to make a profit. The newly added UST increases the pool’s water storage, which will bring the price of the UST back to a dollar, and this time it becomes less because the LUNA is replaced by more UST. When the demand remains unchanged and the total amount decreases, the price will naturally be more valuable.

When there are fewer UST users, holders can exchange the equivalent UST for LUNA, and the supply is reduced, bringing the price of UST back to one dollar. In the long run, if and when UST becomes more widely used, LUNA holders will be rewarded with higher prices. How is this mechanism implemented? When LUNA is replaced by UST, a certain proportion will be destroyed, the rest will go into the community’s treasury, and new UST will be issued at the other end, and the large demand will cause the price of UST to deviate from one USD, more LUNA will be exchanged for UST for arbitrage, so the value of LUNA will increase. The community treasury will have more funds, and these funds will be used to fund development programs.

During expansion, the price of LUNA will continue to rise. If they stake, they can also earn UST. Even when the demand for UST is low, TERRA’s algorithm will increase transaction fees, those who stake will also be rewarded with stablecoin cash flow.This is the official introduction to the operation mechanism of TERRA LUNA for new investors. We don’t know how you feel after watching it. Anyway, we feel that there is a big problem. We can summarize in one sentence that the market value of LUNA will increase only if it is widely used in UST, so now UST is really as said in the video, do people use UST in their daily life, investment and consumption?

We can go to major exchanges to see which trading pairs support UST. Basically, they are USDT and USDC, not to mention daily consumption. I have not seen the usage scenario of UST, and even if there is, it is not very Extensive, the penetration rate of UST is far from its current market value, so how did UST have such a high market value and LUNA’s top ten market value come from?

Anchor is a decentralized lending protocol on the TERRA chain. What is the lending protocol for?

Simply put, if you have UST and it exists in it, Anchor will give you interest. Normally, these interests are paid by the borrower. If the borrower borrows 10% of the interest, the platform may charge 2%. 8% will be given to you, so you will break even. But Anchor’s deposit interest in March was as high as 20%, and the borrower only needed to pay 10% interest, so isn’t this Anchor losing money and posting it to users? That’s right, they are subsidizing money.

The purpose of his doing this is to let more people exchange for UST,. Everyone will think that UST is a stable currency, so it will not lose money. The 20% interest is earned in vain, so that When a large amount of LUNA was exchanged for UST, the price of LUNA skyrocketed. A large amount of UST is not used as the official so-called daily payment, but is used for staking and interest.

So how long can Anchor’s mode of subsidizing money last? Once Anchor lowers the interest rate, UST loses its most important application scenario at present, and when the market starts to sell UST, UST will definitely be decoupled from the US dollar.. When one US dollar LUNA is exchanged for one US dollar UST, part of it is destroyed, and the other part is deposited in the project party’s treasury as a The development funds of the project side, doesn’t this mean that LUNA has been inflation? In theory, one dollar of UST should destroy all of the equivalent one dollar of LUNA, but only a part of it, and the other part is given to the project as development funds. In exchange for real money, they can provide themselves with food, drink and entertainment.

Of course, TERRA has also taken some risk prevention and control measures, such as using your invested TERRA money and the investor’s financing funds to buy BTC for hedging. The problem is, when BTC falls, LUNA will definitely fall along with it. When Bitcoin rises, because the usage scenarios of UST are almost zero, when Anchor has no money to post users, LUNA will still fall, and if BTC is used If it is used as a similar mortgage asset, then why don’t I use DAI, and I have to give you the money and let you buy BTC for me?

In the official video, it is said that if the usage rate of UST is very low, they will increase the handling fee and increase the income for those who staked. Isn’t this a vicious circle, because your usage rate is already very low, and you If the handling fee is increased, no one will use it, and the selling pressure of UST will be even greater, and the principal of those who stake will only become less and less.

If you know about TERRA LUNA, you can also understand Justin Sun’s USDD, because Justin Sun understands the MLM attribute of LUNA. The project with this attribute is Sun Justin’s favorite. Now Justin Sun’s listing of USDD is only the first step, his next step He will definitely try to establish the application scenario of USDD. The new leek area uses TRX to exchange USDT to make a similar pledge in exchange for the so-called high interest rate. Then he sells TRX to cash out at a high level, and then reduces the interest in the ecosystem. At this time, USDD You have already broken off the anchor and have been eyeing the interest of Justin Sun, but Justin Sun has dried up your principal. If you don’t believe it, we’ll see.

This article does not represent investment advice.

Blockchain is a high-risk investment.

You shouldn’t follow up on anyone’s suggestions and opinions without doing any research.

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