Terra’s USD stablecoin has overtaken Maker’s equivalent DAI and is now the largest decentralized stablecoin and the No. 4 stablecoin overall.
Terra surpasses Maker’s DAI and is the No. 4 stablecoin overall
Terra’s UST stablecoin, which is tethered to the US dollar, has surpassed Maker’s DAI. The former currently has a total market capitalization of a little over $9 billion, while the latter still has a market capitalization of less than $9 billion.
This places UST as the fourth most valuable stablecoin on the market, although it differs significantly from the three that come before it.
Tether (USDT) is the most valuable stablecoin, with a market cap of $77.1 billion, and USD Coin (USDC) is the second most valuable stablecoin with a market cap of $41.9 billion. Both assets are run and maintained by centralized institutions. USDC is issued by Circle, and USDT is issued by Tether Limited, which is controlled by Bitfinex’s owners.
Binance’s BUSD, which is similarly tied to the dollar, is the third-largest stablecoin. Its market capitalization is $14.6 billion.
USDT and USDC are backed by a centralized asset pool that includes traditional securities such as US Treasury bonds, cash, and corporate bonds, to name a few. BUSD is said to be backed 1:1 by dollars held by cryptocurrency startup Paxos.
Minting DAI and Terra’s UST
UST and DAI, on the other hand, are advertised as decentralized stablecoins backed by other cryptocurrencies. This makes seizing or blocking the underlying assets that maintain each stablecoin tied to the dollar considerably more difficult.
Users can create DAI by pledging a variety of cryptocurrencies as collateral, similar to borrowing money against equity. However, minting DAI implies that the collateral posted is greater than 100% of the DAI utilized. To use just $1 of DAI, you’d need between $1.30 and $1.70 in Ethereum, depending on the vault.
Terra’s UST is minted similarly, with the exception that users may only create more UST by “burning” (destroying) LUNA, Terra’s native token for transaction fees and governance.
Terra is a smart contract-enabled layer 1 network created with the Cosmos software developer kit. It is now the fourth-largest layer-1 smart contract-enabled network after Cardano, Solana, and Ethereum.
MakerDAO launched DAI in December 2017, making it the market’s oldest-running decentralized stablecoin. Terra’s UST first debuted in September of last year.
A succession of recent developments, many of which began late and focused on changes to the protocol’s burn mechanism, can be attributed to UST’s phenomenal growth.
Terra launched a major upgrade in October that began destroying the LUNA required to mint UST. LUNA has previously been paid to a development fund to support ecosystem projects. A proposal was passed shortly after that, destroying all leftover LUNA in this fund in order to coin a new UST.
As indicated by today’s milestone, doubling down on this burn lever has had an outsized impact on both the price of LUNA and the market value of UST. LUNA is presently trading at $74.53, down 8% from its most recent high.
