Terra's UST has become the third largest stablecoin by market cap, flipping Binance USD (BUSD).
With a market cap of $17.5 billion, it is close to surpassing Dogecoin, the largest meme coin.
Terra, a smart contract platform that competes with Ethereum and other similar blockchain platforms, has been making plenty of headlines over the past month because of the Luna Foundation Guard (LFG) nonprofit.
The LFG has built a massive Bitcoin reserve in order to maintain the stability of the UST cryptocurrency, which is supposed to maintain the U.S. dollar peg.
Tether (USDT) and USD Coin (USDC) remain the two biggest stablecoins by market capitalization. They are worth $85.7 billion and $50 billion, respectively. These stablecoins rely on centralized entities to maintain their peg. UST is an algorithmic stablecoin, which means that its price gets stabilized with the help of an algorithm powered by a smart contract.
Terra presents arbitrage opportunities for its users by allowing them to burn LUNA governance tokens in order to dilute the supply of the UST stablecoin and keep its price strictly at $1. Alternatively, it is also possible to make a profit by exchanging UST tokens for LUNA, thus preventing the former from losing its peg.