The TerraUSD stablecoin (UST), which is part of the Terra ecosystem, has hit another milestone today. It has an almost $17 billion market valuation, making it the third biggest stablecoin.
UST has surpassed Binance USD (BUSD) to claim third place, although the difference is small: only $ 68 million separates them.
Tether (USDT), with a market valuation of $ 82 billion, is now the most valuable stablecoin. With a score of $49 billion, USD Coin (USDC) is ranked second.
Apart from the market capitalization differential, there is a fundamental difference in the way these stablecoins are created.
The BUSD is a fiat-backed stablecoin. The stablecoin custodian — in this case Paxos – keeps an equivalent amount of USD in cash, currency equivalents, or other traditional assets.
The USDC and USDT have a similar structure. According to its credentials, each of these businesses has assets equal to each token in circulation.
Terra’s stablecoin, on the other hand, is created uniquely. This stablecoin is designed to retain its relationship with the dollar by utilizing a mint-and-burn system and clever market arbitrators rather than a centralized entity holding traditional assets such as cash or bonds.
To initiate the process of creating a single UST, the user must first acquire and then burn a single $1 LUNA (Terra token for management and staking). On the other hand, one UST is burned for every $1 in LUNA exchanged for a UST.