Terra’s U.S. dollar-pegged stablecoin UST has overtaken Maker’s equivalent DAI. The former now boasts a total market cap of just over $9 billion, while the latter is still below $9 billion.

This makes UST the No. 4 stablecoin on the market—but it's very different from the three that sit above it.

While top stablecoin Tether (USDT) and No. 2 stablecoin USD Coin (USDC) command market caps of $77.1 billion and $41.9 billion, respectively, both assets are run and managed by centralized entities. Circle is the company that issues USDC, and Tether Limited, which is controlled by the owners of Bitfinex, issues USDT. 

The third-largest stablecoin is Binance's BUSD, which is also pegged to the greenback. It has a market cap of $14.6 billion.


The assets backing USDT and USDC are also centralized, and made up of various traditional instruments like U.S. treasuries, cash, and corporate bonds, to name a few. BUSD is reportedly backed 1:1 by dollars that are custodied by the crypto firm Paxos.

UST and DAI, however, market themselves as decentralized stablecoins, and are backed by other cryptocurrencies. This makes it much more difficult to seize or block the underlying assets that help keep each stablecoin pegged to the dollar. 

Users can mint DAI, for example, by posting a variety of cryptocurrencies as collateral, akin to borrowing cash against stocks. Minting DAI does, however, mean that the collateral posted is more than 100% of the DAI used. You would need between $1.30 and $1.70 of Ethereum to use just $1 of DAI, depending on the vault.

Terra’s UST is minted similarly, except that users can only create more UST by “burning” (destroying) LUNA, Terra’s native token responsible for paying transaction fees and participating in governance.


Terra itself is a layer 1 smart contract-enabled network built using the Cosmos software developer kit. It’s currently the fourth-largest layer 1 smart contract-enabled network, behind Cardano, Solana, and Ethereum

DAI was created in December 2017 by MakerDAO, making it the market’s oldest-operating decentralized stablecoin to exist. Terra’s UST was just launched last September.

Several lines in different colors moving up and to the right.
Market capitalization of Maker’s DAI and Terra’s UST. Source: CoinGecko.

The astonishing growth of UST can be explained by a series of recent developments, many of which kicked off recently and revolved around adjustments to the protocol’s burn mechanism.

In October, Terra executed a large upgrade that began destroying the LUNA needed to mint UST. Prior to this, LUNA was sent to a development fund to support projects in the ecosystem. Shortly after, a proposal was passed that also destroyed all remaining LUNA in this fund to mint more UST.

A doubling-down on this burn lever has had an outsized effect on both the price of LUNA and UST’s market cap, as evidenced by today’s milestone. LUNA is currently trading at $74.53, 8% down from its latest all-time high.

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