What is TerraClassicUSD (USTC)?

Deep Dive

1. Original Purpose and Evolution

USTC launched in 2020 as part of Terra’s ecosystem, aiming to maintain a $1 peg through a mint-and-burn mechanism with LUNC. The system collapsed in May 2022 due to a liquidity crisis, disabling its stabilizing algorithm. Since then, USTC has traded freely, with its value determined by market dynamics rather than a peg.

2. Current Utility in Ecosystem

Despite losing its stablecoin status, USTC remains integral to Terra Classic:
- Gas fees: Used to pay for transactions and smart contract executions.
- DeFi: Supports lending, liquidity pools, and decentralized exchanges on Terra Classic.
- Burns: Community initiatives burn USTC to reduce supply, aiming to stabilize or increase its value.

3. Governance and Supply Mechanics

The Terra Classic community governs USTC’s future through proposals, such as:
- Staking: Recent polls suggest interest in enabling USTC staking to incentivize holding.
- Supply reduction: Over 5.1B USTC have been burned since 2022, with burns accelerating via whale activity and protocol upgrades.

Conclusion

USTC is a relic of Terra’s ambitious stablecoin experiment, now evolving into a community-driven asset with niche utility. While its original purpose failed, ongoing burns and governance proposals highlight efforts to redefine its role. Can USTC transition from a speculative token to a functional pillar of Terra Classic’s revival?