How does Terra Luna stable coin maintain its price stability?

3 answers

• Nov 26, 2021 · 3 years ago
  Terra Luna stable coin maintains its price stability through a combination of algorithmic and market-driven mechanisms. The protocol uses an algorithm called the Terra Money Market to adjust the supply of Terra coins based on demand. When the price of Terra is above its peg, new Terra coins are minted and sold on the market to decrease the price. Conversely, when the price is below the peg, Terra coins are burned to reduce supply and increase the price. This continuous supply adjustment helps maintain the stability of Terra's price.
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• Nov 26, 2021 · 3 years ago
  The price stability of Terra Luna stable coin is maintained through a unique mechanism called the Stability Reserve. The Stability Reserve acts as a buffer by buying and selling Terra coins to stabilize the price. When the price of Terra deviates from its peg, the Stability Reserve steps in to either buy or sell Terra coins on the market, effectively influencing the supply and demand dynamics to bring the price back to its target value. This mechanism ensures that Terra Luna remains stable and reliable for users and investors.
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• Nov 26, 2021 · 3 years ago
  Terra Luna stable coin's price stability is maintained through a combination of market forces and the actions of market participants. When the price of Terra deviates from its peg, market participants have an incentive to buy or sell Terra coins to profit from the price discrepancy. This buying and selling pressure helps bring the price back to its target value. Additionally, the Terra protocol has implemented mechanisms such as arbitrage opportunities and incentives for market makers to further stabilize the price. These mechanisms ensure that Terra Luna remains a stable and trusted stable coin in the cryptocurrency market.
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