What Is TerraClassicUSD (USTC)?
TerraClassicUSD coin is a no longer functional stablecoin that runs on the Terra Classic blockchain. The previous functional version of the TerraClassicUSD coin was TerraUSD (UST), and it was pegged to the US dollar at a 1:1 rate.
If you're interested in the current TerraClassicUSD price, as well as its historical performance at the time of the 2022 crash, check out the USTC price chart above.
TerraUSD was an algorithmic stablecoin. It employed LUNA, which is a parallel floating-rate currency, to back up its peg to the US dollar. The holders of TerraUSD could deposit their coins and earn profit through an experimental lending project called Anchor.
Anchor is a decentralized savings protocol that provided low-volatile yields on TerraUSD deposits. Users were able to generate around 20% of interest with the Anchor protocol. The rewards were gathered using staking rewards from significant Proof-of-Stake (PoS) blockchains and interest that borrowers paid.
However, on May 9, 2022, the asset depegged, and the TerraClassicUSD price fell below $1. Why did this happen? People began exchanging their UST stored on the Curve pool for other stablecoins once UST started trading significantly below $1.
Due to numerous sizable withdrawals from Anchor and the Curve cryptocurrency exchange, TerraUSD's peg to the dollar started to fall apart completely. Both LUNA and USTC prices fell to almost zero within days.
In an effort to halt the spiraling decline of UST, Terra was obliged to mint even more LUNA as a result of this downward pricing pressure. This eventually cut the LUNA price without reestablishing the peg to UST. Unfortunately, Terra was not able to win back public confidence in UST, even after a $1.5 billion sale of BTC from Terra's treasury.
Do Kwon offered a revival plan after the UST depegged. Based on the plan, the Terra blockchain would be split into two chains – a new version of Terra and an old one. Once the community approved this plan, the majority of the dApps that ran on the old version of Terra were ultimately transferred to the new one.
The new blockchain is now referred to as Terra, or Terra 2.0, while the old blockchain was renamed Terra Classic. Do Kwon claims that USTC tokens will not migrate to the new Terra blockchain. Besides, there are no plans to release a new version of the algorithmic stablecoin. Therefore, the TerraClassicUSD token is effectively no longer a stablecoin, and it is not anticipated that the USDC price will ever be pegged to the US dollar again.
Considering the Terra blockchain overall, it's important to mention that it provides users with decentralized applications (dApps) and cutting-edge developer tools. The native token of Terra is LUNA. Besides that, several stablecoins linked to popular fiat currencies power Terra's financial system.
Terra employs a Proof-of-Stake consensus mechanism, which allows users to stake LUNA tokens this way, earning a right to operate validator nodes, which approve and create new transaction blocks.
Besides, Terra employs such technologies as Mantlemint, Terrain, and Terra Station. Due to Terra's permissionless and borderless economy, anyone with an internet connection can access its products.
Talking about its products, in November 2020, Terra launched a TerraSwap, which is an AMM-based DEX. Besides that, in December 2020, it launched a Mirror Protocol. The protocol essentially is a synthetic asset exchange that uses mirror assets, known as mAssets, to track, issue, and trade real-world assets. By minting and trading mAssets on Terra, it was intended to increase TerraUSD's acceptance.
The Previous Version of TerraClassicUSD (TerraUSD)
The creation of TerraUSD (UST) was intended to benefit the Terra community and provide DeFi with a scalable alternative in the face of severe scaling issues that other stablecoins were experiencing. TerraUSD promised more comfortable interchain usage, accurate interest rates, and better scalability.
TerraUSD belonged to the Terra blockchain, which was founded in 2019 by Do Kwon and Daniel Shin. In 2020, they launched the TerraUSD coin in collaboration with Bittrex Global. Do Kwon is a crypto developer. Prior to launching Terra, Kwon worked as a software engineer at Microsoft and Apple. Daniel Shin is an entrepreneur and an economist. He also co-founded and managed such projects as Fast Track Asia and Ticket Monster.
TerraUSD offered more than one benefit in comparison to its competitors. The main benefits it provided included its interoperability, passive income potential, exchange to TerraKRW, and scalability.
Talking about interoperability, TerraUSD employed the Dropship bridge protocol, which integrated UST into various DeFi platforms and allowed users to move UST between different chains.
In terms of passive income, as mentioned before, the Anchor protocol employed by TerraUSD allowed users to earn up to 20% interest on their UST holdings.
Furthermore, TerraUSD could be exchanged for TerraKRW, which was a stablecoin pegged to the Korean Won instead of the US dollar.
Lastly, TerraUSD was highly scalable due to its minting mechanism since all you needed to do was burn 1 LUNA token in order to issue a new UST token.
Unfortunately, after around 2 years of its existence, the TerraUSD crypto project failed. In a very short time span, the TerraClassicUSD price plummeted from $1 to practically nothing.