TerraUSD (UST) is Live on Celo

Mobius is excited to collaborate with AllBridge (again) and launch the first ever UST <> cUSD market. Let the algorithmic stablecoin wars begin!

The First UST<>cUSD Market

UST was one of the fastest growing stablecoins of 2021, and the most successful algorithmic stablecoin by several metrics. UST is the 4th largest stablecoin by market cap ($10.4B), and 2nd to none when it comes to decentralized stablecoins [1]. Part of this success is due to widespread retail adoption of Terra across South Korea and neighboring countries thanks to dapps such as Chai which has 2.6M+ users that have processed over $1.1 trillion in payments [2]. Another reason is interchain adoption of UST across Ethereum, Solana, Cosmos, and other layer 1s–not just for payments, but through DeFi integrations with exchanges and lending markets.

In collaboration with AllBridge, we are excited to bring UST to Celo, expanding the cross-chain universe. Starting today, users can transfer UST between Terra and Celo in under 5 minutes, swap into cUSD on Mobius, and earn interest by providing liquidity to our UST<>cUSD pool.

Incentivized Liquidity Pools

To help kick-start atUST<>cUSD liquidity, we have partnered with the Celo Foundation and DeFi for the People to incentivize liquidity providers (LPs) with CELO rewards. Starting Tuesday, January 18, LPs will receive a total of ~5,500 CELO per week. Moreover, LPs will also receive MOBI incentives as stakers move their pool reward votes to the UST pool. To start receiving dual rewards, simply follow the steps outlined below.

How to Bridge and Start Earning

Start by going to the Bridge page on AllBridge. If the values are not already pre-set, then select Terra for the ‘From’ chain, Celo for the ‘To’ chain, and UST for the ‘Token’.

Send Tokens

On the ‘Choose asset’ drop-down menu, select UST, then connect your Terra wallet. Then enter a token amount and your Celo wallet address. The transfer will take 1–5 minutes and cost 0.3% of the value.

Receive Tokens on Celo

Once your transfer is confirmed by the AllBridge network, you will need to claim your tokens. Click the ‘Receive’ tab at the top of the page, enter your transaction ID, and connect your wallet. You will be prompted to initiate a transfer in your Celo wallet. Once you approve the transaction, the tokens will be transferred to your Celo wallet address. The token you receive will have the name atUST (AllBridge Terra UST) and token address 0xEd193C4E69F591E42398eF54DEa65aa1bb02835c.

Deposit Tokens to Pool and Farm

Once you receive your atUST, go to the Pool page on Mobius and find the atUST (AllBridge) card. Click Deposit, enter an amount, approve, then submit the transfer. This will give you MOB-LP tokens that will earn swap fees from the pool. To earn additional yield in the form of MOBI tokens, you will want to deposit your LP tokens to the farm. Go back to the atUST card and you should now see the option to ‘Farm’ (if you are on desktop you will need to click ‘Manage’ to reveal the Farm button). Click it, then click ‘Deposit LP-Tokens,’ enter an amount, approve, then submit the transfer. Refresh the farming page and you should see your weekly MOBI and CELO rates.

UST vs cUSD

UST is an algorithmic stablecoin that is very similar to cUSD. Both stablecoins maintain their peg via an on-chain exchange that allows users to mint/burn tokens in exchange for an equal value of their reserve assets. In other words, to mint $1 worth of UST/cUSD a user must burn/deposit $1 worth of CELO/CELO–and vice versa for burning stablecoins. When the market price of UST/cUSD on any exchange is greater than $1, arbitrageurs can mint stablecoins at face value then sell them for a premium on the exchange. When the price is less than $1, arbitrageurs can buy the tokens at a discount and burn them at face-value in exchange for CELO/CELO. In both cases, the market price is brought closer to peg thanks to the minting/burning price always being 1:1 (based on oracle exchange rate for reserve assets).

Seigniorage Shares: Burn vs HODL

Both UST and cUSD are backed by their protocols’ native token, LUNA and CELO, also known as seigniorage. In the monetary system, seigniorage is the revenue from money creation, which is the difference between face value and cost to produce [3]. In the case of algorithmic stablecoins, you can view seigniorage as the assets that guarantee the liabilities (total stables in circulation) of the stability mechanism. Where Terra and Celo’s seigniorage differs is that LUNA has an uncapped supply whereas CELO has a maximum supply of 1B tokens. As a result, Celo’s stability mechanism deposits its seigniorage to a reserve, whereas Terra burns its seigniorage. When new stablecoins are minted, the circulating supply of LUNA is decreased whereas a portion of the circulating supply of CELO is deposited to a reserve (removed from the open market). When stablecoins are burned, new LUNA is minted–increasing the circulating supply, whereas CELO is simply released from the reserve.

In this way, Terra stablecoins have “infinite scalability” since an infinite amount of LUNA can be minted to guarantee the face value of UST [4]. This is, of course, at the expense of inflating the supply of LUNA. Conversely, Celo stablecoins will eventually become under-collateralized and require a Tobin Tax that puts a small fee on CELO transfers and helps bolster the reserve [5].

Celo’s Hybrid Seigniorage/Asset-Backed Model

Terra stablecoins are backed solely by LUNA. Celo stablecoins are backed by a basket of currencies held in the Celo Reserve: CELO, BTC, ETH, and DAI [6]. Since Celo stablecoins are not backed by an infinite-supply seigniorage but instead a reserve of finite currencies, it is important to diversify this basket and invest in assets that will outperform the liabilities of the reserve (stablecoins). While the external basket of currencies is held off-chain in a custodial Anchorage account, they will eventually be on-chain via bridged assets, thus allowing users to directly mint/burn Celo stablecoins using BTC, ETH, and DAI. The basket and target ratios are governable via governance, so the community can react to market and capitalization conditions.

Battle of the Algorithmic Stablecoins

Mobius now serves as a secondary on-chain market for arbitraging price deviations in the event of an off-chain de-pegging of either stablecoin. This marks the first crosschain stablecoin pool on Celo that users can arbitrage without going through a centralized exchange. Instead of unwrapping or selling assets on a CEX, arbitrageurs can trade against the respective stability mechanisms of each token.

About Mobius

Mobius is an Automated Market Maker (AMM) on Celo based on the StableSwap invariant that specializes in low-slippage swaps between price-stable tokens. Mobius also includes a bridge interface to allow users to easily migrate their assets, thereby paving the way for more capital to be bridged to Celo and efficiently swapped for other assets with the same underlying.

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About AllBridge

AllBridge is a multi-chain, custodial token bridge connecting Ethereum, Solana, Terra, Celo, Polygon, Avalanche, and more. The interface allows users to easily transfer ERC20, SPL, and other tokens with just a few clicks. Since partnering with AllBridge back in October, our Solana USDC pool has processed over $38M in total volume [7].