Why Terra Stands Out Among Rival Cryptocurrency Projects
Terra has created two cryptocurrencies. One is UST (CRYPTO: UST), a stablecoin intentionally pegged to the U.S. dollar. There are other stablecoins that intend to do this, but most are backed by the dollar. But with UST, its value is backed by Terra's other cryptocurrency, Luna (CRYPTO: LUNA), which makes things interesting.
If the value of UST drops relative to the dollar, then investors can sell UST for dollars and make money. But selling UST burns those tokens, decreasing supply and boosting UST's value back in line with the dollar. If UST's value shoots too high, investors can swap Luna tokens for UST (which exist in a one-to-one relationship) and make money this way. But swapping Luna tokens for UST creates new UST tokens, increasing UST's supply and bringing its value back down in line with the U.S. dollar.
In this video from Motley Fool Backstage Pass, recorded on Dec. 8, Fool analysts Bernd Schmid and Eric Bleeker discuss this unique approach to stablecoins from Terra. More importantly, the guys note that this system is working better than other stablecoin projects so far, meaning Terra stands out from its rivals.
Source Fool.com
