delveUST

delveUST is a decentralized stablecoin protocol on the Terra blockchain. Its primary goal is to maintain a stable price peg to the US Dollar through a combination of algorithmic mechanisms and community governance. The protocol utilizes a seigniorage-style model where its native token, LUNA, plays a crucial role in stabilizing the UST price.

When UST is trading above its $1 peg, users are incentivized to mint new UST by burning LUNA. This increases the supply of UST, driving its price down towards the peg. Conversely, when UST is trading below $1, users can burn UST to mint LUNA. This reduces the supply of UST, pushing its price back up towards the peg, and also increases the supply of LUNA, potentially increasing its value.

The delveUST protocol aims to provide a censorship-resistant and decentralized alternative to traditional stablecoins. It has been used in various decentralized finance (DeFi) applications on Terra, including lending protocols and decentralized exchanges. The stability of delveUST is largely dependent on the perceived value and demand for LUNA, as well as the overall health of the Terra ecosystem. Recent events have highlighted the complexities and potential risks associated with algorithmic stablecoins and their reliance on collateral or arbitrage mechanisms.