The bank run on $UST
The fall continues...
101 today:
A topic we explain —
The Tokenomics of Terra/Luna.
Major happenings in the DeFi ecosystem —
$UST de-pegs, ERC-4626 starts making headway, and the Azuki NFT bit.
A Goldmine of a Twitter thread that sums it all up —
Everything you need to know about the UST crash in one thread.
A peek behind the doors —
Super fun series of Twitter Spaces Events lined up!
In this edition of DeFi Fridays, we’re featuring.. Aztec💡
Aztec is a Privacy shield for Ethereum. It enables affordable, private crypto payments via zero-knowledge proofs. Users save up to 80–90% on gas fees with privacy thrown in for free.
Aztec connect is the next step in Aztec’s vision for privacy and scaling on Ethereum. It allows users to confidentially access world-class DeFi services on Ethereum with up to 100x cost savings, all while strengthening Aztec’s existing privacy guarantees.
For the first time ever, it’s now possible to interact cheaply and privately with any Ethereum DeFi application. Try it out here: zk.money
One Topic: Terra Tokenomics
Keeping the current situation in mind, we’ve decided to quickly recap the Terra Luna tokenomics for anyone new to the space.
Context:
Terra Network is a blockchain project developed by Terra Labs in South Korea and is built on the Cosmos SDK framework.
The network has two native tokens: The Luna Token & the Terra (UST) token. The Luna token is Terra’s governance token and UST, a stable coin. UST is anchored to $1 through an algorithmic process that burns LUNA tokens to create new UST tokens and vice versa.
Stablecoins require utility to maintain and defend their peg. In UST’s case, the utility was Anchor protocol. The protocol paid (before the crash) 19.5% APY to stake LUNA. Arbitragers saw huge opportunities to earn profits using LUNA and UST.
How $UST maintained its peg:
If the price of UST would be above $1, arbitragers would take this opportunity to swap LUNA for UST as 1:1 from the Terra network. They would then sell it off on external markets and earn profits. Simultaneously, once they swap LUNA for UST, a percentage of the LUNA is burned and UST is minted on the network. This causes the supply of UST to increase and the stablecoin to maintain its peg.
Conversely, if the price of UST would be below $1, arbitragers would buy UST from external markets, swap it for LUNA from the network and make profits. At the same time, a percentage of the UST would be burned and an equal amount of LUNA would be minted. This would cause the supply of UST to go down and the peg to return to its value.
Find a detailed version here: Luna / Terra Tokenomics Walkthrough
An article on the same: Tokenomics of LUNA
And the $UST de-peg thread:
One Tweet:
Everything you need to know about the $UST crash in one thread:
In other news:
👀 ERC-4626 could be a gamechanger in DeFi 🤔
A vault is a set of smart contracts that pools user funds and optimizes yield. The ERC-4626 is a Tokenized Vault Standard that establishes implementation standards for vaults and outlines the potential security implications of vaults not being standardized. Approved on March 18, this standard allows easy integration of contracts, and newer innovations have sprung up.
👀 The Azuki NFT bit 🖼️
In a recent tweet by Zagabond, he openly admitted to being the founder of three other NFT projects before Azuki that rug pulled its backers. Soon after the tweet, the floor price of the Azuki collection fell from 20E to 12E.
Now, an update:
As updated in the last edition of our newsletter, we’re hosting a series of Twitter spaces event with various DeFi personalities this month.
Our guest this week is Alex — a core team member of veDAO and VelodromeFi, an occasional threadoor at @wagmiAlexander, and a passionate advocate for decentralized finance.
Catch him on @brew_defi talking about his journey from TradFi to DeFi on 14th May, 11 AM CST!
(Don’t forget to turn on the reminder!🚀)
That’s it for today, folks. See ya next Friday. 🧢
