Hi friends 👋

Stablecoins - coins that attempt to maintain a peg 1:1 to the dollar - have been growing exponentially this year and are approaching $100bn in total supply.

It is a strange reality that an industry that began to escape inflationary fiat currencies has come to rely so heavily on their crypto shadow.

And yet, with many cryptocurrencies being extremely volitile, when markets plunge traders head to stablecoins.

Not all stablecoins are created equal however, and in particular there is a lot of concern that Tether, long rumoured to be not all it claimed to be, could be the cause of the next financial crash. I feel like at the moment much of crypto has its fingers in its ears with regards to Tether, given there are around $70Bn of USDT in existence, a number that keeps on growing. I shudder to think about what a bank run on Tether would look like.

Anyway, that's not the subject of this post, I want to talk about stablecoin yield.

Today I want to talk about UST (not to be confused with USDT), which is part of the Terra blockchain ecosystem. It's an algorithmic stablecoin, which means that it relies on algorithms to maintain its peg, and is not backed by assets.

Algorithmic stablecoins are quite new, and haven't always worked perfectly, as you can see from this chart....

This does create some risk of using UST, but don't give up on it quite yet because we are going to address this peg risk later on.

For now, let's see how we can get some UST.

First you need the Terra Station wallet, either on desktop or mobile.

You can then go to a number of different exchanges to buy UST.

Ok, you have some UST, now let's put it to use.

On Terra, there is a protocol called Anchor Protocol that offers a cool ~19% APY, not bad for holding a stablecoin.

Assuming it is stable.

Well, let's not assume, let's buy some insurance. Yes that's right you can buy insurance against UST losing value against USD. Oh and you can get insurance against smart contract risk, so if Anchor gets hacked, you are also insured.

I think these are probably the two main risks, and we can eliminate them with insurance. There are several providers, and they are one click away through Anchor.

I chose Unslashed, because it can give both smart contract and peg insurance in one click.

Note that you have to buy insurance in ETH, whereas your UST is on Terra. I clarified with the Unslashed team that in the event of a claim, basically you just have to sign a message on both wallets to prove they are both yours. Getting covered for both will cost you about 4% per year.

Once you pay for the insurance, it will therefore reduce your total yield down to about 15%, still substantially better than the 0.01% you get in your bank account.

So with smart contract and peg risk covered, I think this is probably the highest and safest yield around.

You now have a high yield, insured, savings account. 🥳

Let me know if you know of any better opportunities.

Until next time.

Jamie

Get UST and stake it on Anchor Protocol:

👉 Terra’s website

👉 Anchor’s website

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🚨 Disclaimer: This is not investment advice. Everything in this newsletter is for entertainment and education purposes only. Do your own research. Think for yourself. Any financial interests the Block Breakdown team has in any project mentioned will be clearly highlighted.