TerraClassicUSD (USTC) is a decentralised algorithmic stablecoin that was originally designed to maintain a 1:1 peg with the US dollar. It operates on the Terra Classic blockchain and was previously known as TerraUSD (UST) before the collapse of the Terra ecosystem in May 2022.
USTC uses an algorithmic stability mechanism involving its counterpart, LUNC (Luna Classic), to manage price stability. The protocol implements a "mint and burn" mechanism:
This algorithm was intended to maintain USTC’s dollar peg. However, since the de-pegging event in May 2022, USTC has ceased functioning as a stablecoin.
USTC has various use cases within the Terra Classic ecosystem and decentralised finance (DeFi), including:
Industries like DeFi, cryptocurrency trading, and digital payments have integrated USTC in the past, although its utility has significantly diminished post-collapse.
USTC was launched as TerraUSD (UST) in September 2020 by Terraform Labs, co-founded by Do Kwon and Daniel Shin. Initially a promising algorithmic stablecoin, it saw widespread adoption in DeFi. Key milestones include:
USTC began as an innovative stablecoin but experienced a catastrophic collapse during its de-pegging event in May 2022, leading to a massive loss of trust and value. While it continues to exist on the Terra Classic blockchain, it no longer functions as a stablecoin, and its market role has significantly diminished. The event serves as a cautionary tale in the challenges of algorithmic stablecoins.