WSB Trader Rocko (@traderrocko), a crypto expert on X, shared the release of the USTC whitepaper. This move by the Terra Classic community marks a significant step towards re-pegging USTC to its intended $1 value.
The document outlines the implementation of a Collateral Market Maker (CMM) designed to stabilize USTC by controlling capital flows.
This approach addresses the failures of the previous algorithmic stabilization methods and provides a structured framework to enhance the stability and value of the stablecoin.
🚨 $USTC Whitepaper released!
Let repeg USTC and make $LUNC great again 🙏🙏 pic.twitter.com/t39jPoaAm5
— WSB Trader Rocko 🚀🚀🚀 (@traderrocko) November 8, 2024
Key Elements of the Whitepaper
Collateral Market Maker (CMM): The whitepaper introduces a Collateral Market Maker (CMM) to control USTC capital flows using a Collateralization Ratio (CR). This ratio is defined as the total supply of USTC divided by yield-bearing deflationary collateral.
Capital Flow Control Mechanisms: The CMM adjusts fees to manage capital outflows during market stress. If the CR falls below the Swap Ratio (SR), the CMM locks until the CR exceeds the Reboot Ratio (RR). This ensures that USTC remains adequately collateralized and stable.
Mint Mechanism for a Reboot: The whitepaper proposes automatically swapping existing USTC to USTY to safely reboot the system. Once the CR is above the Mint Ratio (MR), USTC is minted for purposes such as purchasing and burning LUNC, rewarding validators, and providing yield to stakers.
Economic Theory and Stabilization: The whitepaper leverages economic theories relevant to developing economies to guide the CMM’s design. It acknowledges the failures of algorithmic stablecoins and emphasizes the importance of collateral-backed stability mechanisms.
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Potential Impact on Re-Pegging USTC
The goal is to repeg USTC to $1. By using a diversified basket of yield-bearing assets as collateral, the CMM can provide a robust foundation for USTC’s value. This approach ensures that the stablecoin is backed by assets that appreciate over time, enhancing its stability and resilience against market fluctuations.
The whitepaper outlines how validators can use minted USTC to purchase and burn LUNC, distribute rewards, and stimulate economic activity. These incentives align validators’ interests with the broader goal of maintaining the $1 peg, creating a collaborative effort to support the currency’s stability.
The CMM’s fee adjustments and locking mechanisms provide a flexible response to changing market conditions. By automatically adjusting to capital flows, the CMM can mitigate the risks of sudden market shocks and maintain the stablecoin’s peg more effectively than static systems.
The re-pegging of the stablecoin to $1 can also enhance the Terra Classic ecosystem’s economic stability, attracting more users and developers. The proposed Collateral Market Maker (CMM) in the USTC whitepaper offers a comprehensive solution to re-pegging USTC to $1. With support from companies like Binance, USTC might achieve these goals.
Disclaimer: This content is meant to inform and should not be considered financial advice. The views expressed in this article may include the author’s personal opinions and do not represent Times Tabloid’s opinion. Readers are urged to do in-depth research before making any investment decisions. Any action taken by the reader is strictly at their own risk. Times Tabloid is not responsible for any financial losses.
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