First and foremost, I want to emphasize that many ordinary, hard working people have lost money as a result of the recent crypto market crisis. Some people lost their whole savings. While money isn’t everything, losing a significant amount of it can feel that way. If you or someone you know has lost money as a result of the LUNA/UST collapse, remember that life is always worth living.

If you haven’t heard, terraUSD (UST), a cryptocurrency that is supposed to stay at $1 (also known as a stablecoin), has lost its value. It’s usually not a good sign when something is meant to be $1 but isn’t. Furthermore, LUNA, the crypto currency that underpins UST, has lost nearly all of its value.

But it has to be done because readers will recall me gushing about the Luna Foundation Guard (LFG) declaring it will acquire $10 billion in bitcoin to back UST. To be honest, I was primarily delighted because I was able to write about what Hal Finney had posted on the well-known Bitcoin Talk site. But, to be honest, I wasn’t really enthusiastic about the prospect of a bitcoin-backed stablecoin.

Stablecoins are a type of cryptocurrency that exists. The value of stablecoins is expected to be $1. Usually. They are occasionally 1 euro or 1 won, but not always. The dollar’s hegemony is to blame. 

Stablecoins exist so that crypto-natives can quickly move in and out of the dollar without requiring the approval of a bank. Stablecoins facilitate the majority of crypto trade volume and fuel the “DeFi” crypto carousel (decentralized finance). More crucially, those living under totalitarian governments that encourage hyperinflation utilize stablecoins.

Stablecoins come in a variety of varieties, including tether (USDT), USD coin (USDC), Binance USD (BUSD), and dai (DAI). We also had terraUSD, which was fairly notable (UST). These are the five largest stablecoins, with a combined worth of $160 billion. Three of these stablecoins (USDT, USDC, and BUSD) are centralized collateralized stablecoins. These entities own a treasury of dollars that back each coin, allowing the holder to redeem the coin for $1 from the issuer.