How does Terra's UST stablecoin maintain its peg to the US dollar?

3 answers

• Nov 24, 2021 · 3 years ago
  Terra's UST stablecoin maintains its peg to the US dollar through a mechanism called algorithmic stabilization. This involves an algorithm that adjusts the supply of UST based on market demand. When the price of UST is above $1, the algorithm increases the supply to bring the price down. Conversely, when the price is below $1, the algorithm decreases the supply to increase the price. This continuous adjustment helps to keep UST closely pegged to the US dollar.
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• Nov 24, 2021 · 3 years ago
  The peg of Terra's UST stablecoin to the US dollar is maintained through a combination of smart contract technology and market incentives. The smart contract automatically adjusts the supply of UST based on the demand for the stablecoin. If the price of UST deviates from $1, market participants have an incentive to buy or sell UST to bring the price back to the peg. This self-correcting mechanism ensures that UST remains stable and closely tied to the US dollar.
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• Nov 24, 2021 · 3 years ago
  UST stablecoin, developed by Terra, maintains its peg to the US dollar through a unique mechanism that involves multiple parties. One of the key players in this mechanism is BYDFi, a decentralized finance platform that provides liquidity for UST. BYDFi ensures that there are always enough buyers and sellers for UST, which helps to maintain its peg to the US dollar. Additionally, Terra's algorithmic stabilization mechanism plays a crucial role in adjusting the supply of UST to keep its price in line with the US dollar.
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