Terraform Labs issued Terra and Luna and became popular recently. Terra alone was once the third-largest stablecoin in terms of market capitalization. Meanwhile, Luna also sat in the eight place in cryptocurrency market capitalization. Unfortunately, CoinMarketCap said something else about cryptocurrency information. Luna was down below 1 cent, which means that it was down by 99.98%. TeraUSD (UST) fell to the 40 cent mark.
Stablecoin is a cryptocurrency that has increased price stability.
Stablecoin is well-known for its increased price stability. There is an evaluation saying that cryptocurrency was not sufficient to replace actual currency. This is due to prices fluctuating sharply several times a day and only a few people use it. Stablecoin came out to compensate for this. “Pegging” prices on real assets such as dollars and euros. Most of the top stable coins in the market capitalization are linked to the U.S. dollar.
Based on the 2021 total report from Wharton School, it depends on how Stablecoin secures stability from the price. The foremost concern is the “centralized type”. This is a method in which reliable and centralized issuers gain the ratio of legal currency. The epitomes are coins and dollars guaranteed by coins, at 1:1. The representative coin is “Tether,” the third-largest coin in market capitalization after Bitcoin and Ethereum. The ‘asset collateral type’ issues coins with assets deposited in smart contracts as collateral.
Terraform corresponds to the third type of ‘algorithmic stable coin’. Similarly, the design is to link it with dollars, but unlike other types, it maintains the price by issuing or incinerating a sister token, Luna, instead of actual floating assets. The algorithm design is to purchase Terra with Luna if Terra’s price falls under $1. On the other hand the algorithm leads to buying Luna with Terra if it is higher than $1.
