Is UST a stablecoin?

The algorithmic stablecoin UST briefly fell 2% below its peg to the US dollar on Monday, according to data from crypto exchange Binance -- the fourth significant drop below its peg in the last two days. From a report: UST is a stablecoin backed through its relationship with the LUNA token.

What is an algorithmic stablecoin?

Algorithmic stablecoins are a newer type of stablecoin. Instead of using a reserve of assets, algorithmic stablecoins use smart contracts to maintain their “peg” to the dollar. One of the best examples of an algorithmic stablecoin is TerraUSD (UST). UST is the stablecoin on the Terra blockchain.

What is a USD-pegged stablecoin?

In the cases of USD-pegged stablecoins, their prices are supposed to be $1 at all times. Each stablecoin project differs in ways they maintain the peg. The two biggest ones, tether ( USDT) and Circle's usd coin ( USDC ), are “over-collateralized” by fiat reserves, meaning they have cash or cash-equivalent assets in their reserves.

How many dollars should a stablecoin have in a reserve?

The thinking goes that, for every stablecoin distributed, there should be one dollar in the reserve. Depending on what asset the stablecoin is pegged to, this can be gold, euros, dollars, or even real estate. Stablecoins like Tether and USDC are examples of collateralized stablecoins.