Author: shushu, BlockBeats
Editor: Jack, BlockBeats
On November 21st, Dfunk, a governance member of Terra Classic, posted a forum thread on the Terra Classic forum regarding the reactivation of the Terra market module and the gradual re-adjustment of USTC to be pegged to 1 USD.
However, this post aimed at saving USTC did not stir much interest in the market until November 26th, when USTC surged by 180% in 24 hours, making the community aware of more significant events behind the USTC price surge.
Celestia+ New Anchor+Nomic, What does Mint Cash want to achieve?
Behind the soaring USTC price, the most noticeable factor was a new project – Mint Cash. Mint Cash claims to be the spiritual successor of TerraUSD (UST), with team members from the former Anchor team and Aleph Research, including team leader Shin Hyojin and engineer Minjae Yang.
On November 25th, Mint Cash’s team leader Shin Hyojin explained the relationship between Mint Cash and Terra on the X platform, mentioning how to receive a Mint Cash airdrop by locking USTC in a airdrop contract deployed on Terra Classic, and then Mint Cash will airdrop an equivalent amount of tokens valued at 1 USD, while the locked USTC will be destroyed.
According to team leader Shin Hyojin, after USTC is destroyed, the circulating supply in the market decreases, which benefits USTC holders and those supporting the new project, making it a mutually beneficial situation.
As a result, the community attributed the recent USTC price surge to Mint Cash’s bundling strategy.
Mint Cash is a stablecoin system collateralized by BTC, based on the original Terra Classic codebase, an IBC chain originating from Terra Classic. Its core components include the DA layer based on Celestia, leveraging Luna’s UST savings yield protocol Anchor Protocol, and the nBTC protocol Nomic that locks BTC into the Cosmos ecosystem.
Celestia+ New Anchor+Nomic, What does Mint Cash want to achieve?
In the wake of the USTC price surge, the most eye-catching project was a new project called Mint Cash. Mint Cash claimed to be the spiritual successor of TerraUSD (UST), with team members from the former Anchor team and Aleph Research, including team leader Shin Hyojin and engineer Minjae Yang.
On November 25th, Mint Cash team leader Shin Hyojin explained the relationship between Mint Cash and Terra on the X platform, detailing how to receive a Mint Cash airdrop by locking USTC in an airdrop contract deployed on Terra Classic. Mint Cash would then airdrop an equivalent amount of tokens valued at 1 USD, while the locked USTC would be destroyed.
According to Shin Hyojin, the destruction of USTC would decrease the circulating supply in the market, benefiting both USTC holders and supporters of the new project. This appeared to be a win-win situation for all parties involved.
As a result, the community attributed the recent surge in USTC’s price to Mint Cash’s bundling strategy.
Mint Cash is a stablecoin system collateralized by BTC, based on the original Terra Classic codebase, an IBC chain originating from Terra Classic. Its core components include the DA layer based on Celestia, leveraging Luna’s UST savings yield protocol Anchor Protocol, and the nBTC protocol Nomic that locks BTC into the Cosmos ecosystem.
Related reading: “Boost USTC Surged More Than 150% in a Day, How to Correctly Understand the Stablecoin Project Mint Cash?”
Mint Cash is expected to release a new version of the Anchor Protocol called Anchor Sail, which will play a crucial role in stablecoin growth and anchoring within Mint Cash.
However, Mint Cash announced on October 8th that it only had over 2500 Twitter followers. Therefore, there are doubts as to whether the airdrop rules of Mint Cash tied to USTC can really bring such a price surge to USTC.
USTC “Resurrection Proposal,” Community Interpretations Vary
Returning to the proposal on the Terra Classic governance forum, the proposal mainly focuses on gradually restoring the anchoring of LUNC and USTC by reactivating the market module. The proposal has not officially opened for voting and is still in the discussion stage.
To safely reactivate the market module, the proposal suggests setting the price difference fee at 98% to stabilize USTC at 2 cents, gradually increasing it to 3 cents, 4 cents, etc. Then burning 100% of the price difference fee instead of sending it to the Oracle pool to maintain the stable value of USTC.
In addition, by limiting the size of the virtual liquidity base pool and increasing the recovery rate, the proposal ensures that the burning speed of USTC exceeds the recovery rate to prevent oversupply. At the same time, setting the maximum supply limits for LUNC and USTC to maintain the stability and controllability of the currency supply.
A year ago, due to bank runs and the USTC anchor breaking, the pledging, IBC, and market module were all disabled. However, pledging and IBC have been reactivated, while the market module remains inactive. The proposal aims to reactivate the market module to potentially re-anchor USTC to 1 USD and provide income for validators and trustees through the price difference fees for LUNC/USTC exchanges.
However, most people in the proposal comment section do not agree with this approach. Neon, a Terra Classic governance member, stated that the risk-reward ratio of this proposal is disproportionate, if not negative. He believes it is not a plan but a creation of a Trojan horse. He stated, “Protecting the value of LUNC should be our top priority, so we must set the maximum supply limit of LUNC at the current level. If this is not feasible, then we should look for other ways.”
However, another part of the community believes that this proposal is the key reason for the sudden surge in USTC’s price. They think that the proposal has taken the first step towards restoring anchoring and that directly following the original LUNA’s technical solution is information that the market can understand.
USTC’s predecessor is UST, the largest stablecoin on the Terra ecosystem, anchored to 1:1 with the US dollar. LUNA is the governance token of the Terra protocol, mainly used for paying public chain gas fees, staking mining, and protocol governance. Once the third-largest stablecoin by market capitalization, UST experienced a severe price anchor break.
On May 10, 2022, the native algorithmic stablecoin UST in the Terra ecosystem experienced a severe price anchor break due to capital hunting and debt crises, dropping to a low of 0.6 USD.
Related reading: “Leveraging $84 million to move a $40 billion financial empire, the rise and fall of UST”
Now, the re-anchoring of USTC seems to be on the agenda, but the community holds uncertain attitudes towards the recent surge in USTC’s price and whether it can be re-anchored.
Firecoin Incubator researcher 0xLoki believes that the proposal suggests stabilizing the USTC price at 0.02 USD, creating arbitrage opportunities during the gradual rise, leading to a sell-off of LUNC. “Therefore, the rise in USTC prices is actually negative for LUNC, but USTC still needs the market liquidity of LUNC to support it, creating a vicious cycle.”
DeFi researcher @cmdefi also believes that the surge in USTC’s price is unrelated to the re-anchoring proposal on the Terra Classic forum but more likely due to the new project Mint Cash and the new version of the Anchor Protocol that members of the Anchor team are about to participate in.
However, community user @gotolab1979 stated that the proposal is “100% copying LUNA,” and the algorithm for anchoring USTC and LUNC in the proposal has not changed, only the parameter spread is set at 98%. They believe that even if the USTC price stays at 0.02 USD for a long time, it can still exist as a stablecoin of 2 cents. This is also the reason why the market can understand why USTC has surged wildly.
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