Eli5_DΞFi 🏭, 🦇🔊
Eli5_DΞFi 🏭, 🦇🔊

@eli5_defi

8 تغريدة 88 قراءة May 09, 2022
$UST having another stress test today a.k.a. de-peg, it is best to revisit basic principles of $UST and $LUNA in layman's terms.
#Lunatics #Terra #UST #LUNA
@terra_money @stablekwon @Remi_Tetot @nickplatias @ZeMariaMacedo @KanavKariya @CryptoHarry_
(1/x)
$UST is algo-stables that the value determined by adjusting the supply algorithmically. To achieve this equilibrium, $LUNA act as stabilizer to maintain $UST peg to $1.
#Lunatics #Terra #UST #LUNA
(2/x)
$LUNA is not just act as $UST stabilizer, it is also native token of @terra_money ecosystem similar to $ETH in @ethereum. The growth of Terra ecosystem and mass adoption of $UST will increase value of $LUNA
#Lunatics #Terra #UST #LUNA
(3/x)
How does it work actually? If $UST price above the peg (>$1), $LUNA will be burned to mint more $UST resulting in inflation supply, through arbitrage $UST will back to its peg (~$1).
#Lunatics #Terra #UST #LUNA
(4/x)
However, If $UST price below the peg (<$1), $UST will be burned to mint $LUNA resulting in contracted supply, through arbitrage $UST will back to its peg (~$1).
#Lunatics #Terra #UST #LUNA
(5/x)
@LFG_org also actively buying $BTC as backed reserves for $UST. This will help during de-peg crisis where people can change their below the peg $UST to $BTC with equal value. This will reduce the dilution to $LUNA and prevent spiral of death.
#Lunatics #Terra #UST #LUNA
(6/x)
Spiral of Death is a condition where people lose their trust to the protocol due to unrestored peg. This will cause massive redemption cascade that exhaust the reserves and causing the token to lose its value.
#Lunatics #Terra #UST #LUNA
(7/x)
@LFG_org as mandated by @terra_money have tasks to fund the reserves to ensure $UST can safeguard its peg and reduce pressure to $LUNA. LFG also tasked to accelerate growth of Terra ecosystem through grant to potential project.
#Lunatics #Terra #UST #LUNA
(8/x)

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