What is TerraUSD (UST) Stablecoin
When the price of UST is above its intended peg, $1.00, supply is too low and demand is too high. The protocol incentivizes users to burn LUNA and mint UST. The new supply of UST makes its pool larger, balancing supply with demand. Users mint more UST from burned LUNA until UST reaches its peg. The LUNA pool gets smaller in this process, increasing the price of LUNA.
Conversely, when the price of UST is below peg, $1.00, supply is too high and demand is too low. The protocol incentivizes users to burn UST and mint LUNA. The decrease in UST’s supply causes scarcity, and the price of UST increases. More LUNA is minted from burned UST until UST reaches its peg. The LUNA pool increases and lowers in price.
Just like LUNA, VADER is the variable counterpart to the stable asset USDV. By modulating supply, VADER's price increases as the demand for stablecoins increases.