1/ To help others understand the $UST arbitrage and why the peg doesn't come back straight away...
There are some parameters that determine the spread when minting and burning $UST / $LUNA. The more mint/burn happens in a day, the higher the spread.
#terraluna
There are some parameters that determine the spread when minting and burning $UST / $LUNA. The more mint/burn happens in a day, the higher the spread.
#terraluna
2/ E.g. Once about $200m of arbitrage has been done through mint/burn, then the spread is about 0.5%. I.e. You don't get 1 $UST for $1 worth of $LUNA, you'll get 0.995 $UST.
3/ The affect is a dampened pull back to peg and it's part of the reason $UST is not back at $1. This is intentional to reduce manipulation and gaming of the mechanism. (for another thread maybe)
4/ These parameters that affect the spread are updated through gov. proposals. Historically they've been updated as $UST has grown and has required adjustment to the mechanism to keep up with trading volume.
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