For longtime readers of this letter, you’re surely aware of the two leading decentralized stablecoin providers: MakerDAO and Terra.

Both Tether (USDT) and USD Coin (USDC) are much larger than both of these projects, but they fail the decentralized test.

MakerDAO is behind the stablecoin DAI, and Terra is behind the fast-growing UST stablecoin. And though Terra has made a late entrance into this scene (Maker debuted in 2014 and DAI arrived in 2017), UST recently took the crown as the largest decentralized stablecoin by market cap.

For reference, USDT has a market cap of $80.8 billion, USDC has $52.4 billion, Terra has $15.8 billion, and DAI has $9.3 billion.

Market capitalization of UST (purple) and DAI (orange) over the past year. Source: CoinGecko

As you can see, UST took the lead in December. At that time, some folks may have thought it was just a fluke akin to various other flash-in-the-pan stablecoin attempts from the past.

Since then, however, UST has continued to surge.

And just as the stablecoin has surged in size, so too has Terra’s governance token LUNA, now a top 10 cryptocurrency by market cap—ahead of Cardano, Solana, and Avalanche. Since UST overtook DAI on December 20, the price of LUNA has risen from roughly $78 to today’s price of $93.5—a 19% hike.

The parallel rise of these two assets is no surprise either. That’s because each time more UST is minted, LUNA is destroyed.

And insofar as the Terra-based DeFi ecosystem has expanded and increased demand for a native stablecoin, there’s been tons of LUNA destroyed (meaning less available on…


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