How To Arbitrage An Entire Terra Ecosystem

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There has been no shortage of stablecoin projects in the market, and people certainly want to participate. After all, the cryptocurrency market is known for its volatility.  Terra addresses this issue by creating a price-stable currency that allows faster and cheaper digital transactions. 

But how does Terra work? And how are its offerings different from other stablecoins?

Founded by Do Kown, Terra is a blockchain payment network that uses stablecoins and is powered by its native LUNA token. Terra USD is not secured by U.S dollars but by smart-contract algorithms and the LUNA coin. 

To put things into perspective, USDT, the biggest stablecoin globally, was claimed to be backed by the U.S. dollar by its operator, Tether. When it was found that the coin was actually backed by assets like commercial paper, the operator was fined USD 41 million for false claims and misleading the people. 

Terra achieves price stability via an elastic money supply enabled by stable mining incentives. Their protocol also uses the profit made from issuing the currency - also called seigniorage - to stimulate transactions and encourage more adoption. 

Because Terra’s stablecoins are algorithmic, i.e., the protocol is designed to achieve price stability, the value of one UST coin is equal to USD 1 and will remain so thanks to the LUNA token. When UST drops below that value, LUNA supplements the supply to help maintain its peg to the currency. 

Arbitrage in terms of cryptocurrency and trade refers to the process of buying an asset on one exchange platform and selling it on another where the price of the asset is higher. This makes the trader profits