USTCC: A 101.5% Over-Collateralized Stablecoin for Terra Classic

Proposals
1

Version 1.0 (subject to minor changes and improvements)

USTCC is a USD-denominated, fully over-collateralized stablecoin built on Terra Classic to drive targeted deflationary pressure on USTC. It uses USDC as primary backing with a 1% USTC mint premium and a 1% USDC buyback fee (split 50% burn / 50% vault) to achieve 101.5% initial over-collateralization. This creates consistent buy, burn, and lock mechanics for USTC while providing a stable, low-friction USD asset for the ecosystem. USTCC complements existing efforts like the LUNC Forex Collateralized Stablecoin Module (CSM) by focusing on direct USTC revival.

Introduction

USTC remains suppressed at ~$0.006 with over 5.5 billion tokens in circulation. While CSM v2 advances multi-fiat collateralized stables with fee-funded buybacks, a dedicated USD stablecoin with embedded USTC premiums and burns can accelerate supply reduction and trust rebuilding.

Objectives:

• Deliver a 101.5% over-collateralized USD stablecoin (USTCC).

• Generate organic buy/burn/lock pressure on USTC per mint.

• Enable easy adoption with USDC-only minting (protocol handles USTC).

• Integrate with Terra DeFi for utility and compounding effects.

Mechanism

Core Design

• Primary collateral: 100% USDC.

• Secondary collateral: USTC locked in a governance vault.

• Initial over-collateralization: 101.5%, growing with mint volume.

Minting (for 1 USTCC):

  1. Deposit $1.00 USDC → Primary backing.

  2. Deposit USTC worth $0.01 (1% premium) → Directly to vault.

  3. Pay $0.01 USDC fee (1% buyback) → Protocol swaps to USTC on DEX (e.g., Astroport).

• Bought USTC split: 50% burned (~0.5% effective burn), 50% vaulted (~0.5% added buffer).

Result: 1 USTCC minted, backed by $1 USDC + $0.015 USTC value = 101.5% collateral. Immediate buy pressure, burn, and lock on USTC.

Redemption:

Burn 1 USTCC → Receive $1 USDC.
Minimum redeem requirements 10000$ in USTCC

Vault Management:

• Smart contract locks all USTC premiums and buyback portions.

• Auto-liquidation triggers if USTC price drops erode buffer below 101%.

• Governance DAO controls future usage (e.g., burns, staking, buyback loops).

Tokenomics & USTC Impact

• Per $1M minted: ~$10k USTC bought → ~$5k burned (~833k USTC at $0.006) + ~$5k vaulted.

• Effects: Buy pressure on DEX, permanent burns reduce supply, vault locks reduce circulating supply and build buffer.

• Compounding: Rising USTC price increases USTC acquired per fee, accelerating deflation.

• No new USTC minting; fully backed design.

Benefits

• Stable 101.5%+ backing with USDC primary trust.

• Frictionless minting (USDC + fee only).

• Direct, compounding USTC deflation.

• Ecosystem synergy (DeFi pools, CSM compatibility, yield incentives).

Risks & Mitigations

• USTC volatility → Auto-liquidation + governance top-ups.

• Low adoption → Incentives (yields, LP rewards).

• Swap/oracle risks → TWAP oracles, multi-DEX routing.

• Contract risks → Full audits pre-launch.

• Daily redeem caps of 25% circulating supply

Governance & Implementation

• Deploy via on-chain governance proposal.

• Adjustable parameters (fees, ratios) via proposal.

• Roadmap: Proposal → Audits/testnet → Mainnet launch → Integrations/incentives.

Conclusion

USTCC provides a practical, USD-focused path to USTC revival by embedding 1% premium-to-vault + 1% buyback (0.5% burn / 0.5% vault) into a 101.5% over-collateralized stablecoin. It delivers immediate supply pressure while offering ecosystem utility. Community input will refine details—let’s discuss parameters, incentives, and integrations.

Presented by : Nicolas Boulay and Luncverse Validator, Node Nexus And your friendly neighborhood Cookie DO

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2 Likes
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Why would someone pay 101.5% to receive 100%?

The trade starts with -1.5%

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Yes :+1: to have a native stablecoin in the cosmos youd be surprised what we can achieve and the support it would get on top of being hyperdeflationary for ustc. Wasnt Classic Dex suggesting something similar? I dont recall you actually putting numbers on those infamous fees?

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Trades in the pools start at 0.5% onchain fees. If you want to mint the stablecoin it costs you 2% premium. Do your homework

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To many if and can.

Nope classic dex brought revenue it doesnt toke from the community

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Hahahah no it did not it made assumptions based on unrealistic numbers and never actually showed basic financials.

8

How is that related to this topic?

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It doesn’t change that the trader pays 101.5% to get 100% back.

Instead lose of -1.5%

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Why would a user pay $1.02 to get $1.00?

Rational market actors will not mint USTCC unless:

  1. High Yield: The DeFi APRs for USTCC pairs are significantly higher than the 2% entry cost.

  2. They are heavily invested in USTC and view the 2% fee as a donation to pump their bags.

  3. USTCC trades at a premium (e.g., $1.03) on secondary markets, which is unlikely for a stablecoin.

1 Like
11

To have a native stablecoin that actually works. I along with many others will gladly pay a 2% premium to mint a stablecoin especially as prices in the pools fluctuate you can actually get it 1/1. Also, you only pay the premium for mint, in the liquidity pools there is no 2% premium. :+1:

12

The 2% premium compared to the money traders will be able to make on the FOREX is very small. What we are proposing is mearly a vehicle to accelerate the adoption of the chain and its products as well as recover USTC over time to actually put money back in the pockets of the community members who hold it.

We need to remember that there is over $6bn of bad debt connected to USTC and we want to be able to get trading pairs up on the FOREX to drive volume, tax, burns etc for the benefit of the community. USTCC will be owned by the community and the same DAO that controls all other LUNC mechanisms.

We do also need to address the tax split for even more benefit to the community, as we need to maintain burns but also keep funding the OP and CP. There needs to be an incentive to investors (all of us) and validators to keep staking and validating on chain. Burns are important but volume is the most important component, which is what the FOREX will bring.

The main vision is to make LUNC more valuable for all. We will be able to add more and more Market Cap whilst burning the supply too. This is not just a small idea, it has many other strategic outcomes attached to it.

I hope this helps the conversation as we cannot keep fighting over trying to recover the chain… for all.

Thank you

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-The USDC to back it is staying out of the chain or is it brought on chain?

-If it´s on chain USDC that backs it, why would people mint USTCC and use it instead of using USDC directly at no cost? What is the real use case that allows people to get back that 2% that makes it a good idea to mint it and that you cannot provide with USDC already?

-If hight yield is promessed it has to be competitive against USDC yield, and where is that yield comming from to be sustainable? Lending? swap fees?

I do see an idea, but I cannot yet see the need for this. I understand it leaves ustc debt behind and no longer need to peg etc. but it doesn´t seem like a need or a strong option of a stable. What if USDC depegs? it seems a risky game all collateral in one basket to mint a new stable for our chain. The last thing we need for this chain is another stablecoin depeg, that depends on other people out there.

For example the ceramic UST1 stable is 190% collateralized and with different assets that can make attractive yield and lock USTC out of circulation, at a reasonable price already, and out of L1 governance nonsense politics and validator wars etc.

Im thinking that the USTC part, although it has a nice reason to be, (creating buy pressure for USTC, use case for USTC, locking supply), wouldn´t it be wiser just to leave it behind?

For example: Create a “mirror” USTCC backed 1:1 by USDC, even like a “wrapped” or “wormhole” version of it that mints / burns back to back. You mint it just paying lunc burn tax and gas, that´s it. You can mint locking a USDC or with a higher collateral in other assets like sUSD that we alredady also have on chain, backed at least 150%. If the argument is not taking the USTC debt like something we have to pay bcause it´s not our debt, why would USTC be part of the initiative to give it value back? It´s like recognizing the debt in the first place.

We already have at least 4 stablecoins on chain:

sUSD (Selenium) backed 150%
USDC (bridged)
USDT (bridged axellar)
UST1 project of Ceramic, 190%

14

Great question, selenium usd is layer 2 and will not be able to gain the adoption we want evern though is good
USDC- is a centralized entity who can blacklist the collateral of foreign exchange in the future if we begin having lots of success
Usdt - bridge risk and complexity for investors to manage
Ustr- layer 2 but also promising project.

USTCC advantage is having a L1 Native Stablecoin for not just LUNC but all of cosmos. No bridge risk, no blacklist risks, not in layer 2 and over collateralized while buying back and burning USTC making investor whole while our collateral grows with USTC. We can even use USTCC as main collateral source for the Forex which will accelerate even more the USTC buy back and burns.

15

A 101.5% collateral ratio is highly aggressive. What’s the liquidation process? What’s USTC’s role here? And where is the yield generated?

Kindly share a detailed technical whitepaper for our in-depth review.

1 Like
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Good questions — here’s the simplified breakdown:

  • Collateralization: USTCC is 101.5% collateralized

    • 100% USDC held in the primary vault
    • +1.5% buffer routed to the CMM vault for secondary collateral and rebalancing

  • Mint mechanics:

    • Minting 1 USTCC ($1) requires:

      • $1.00 USDC → USDC vault

      • Mint premium 1% USTC

      • Protocol Fee 1% USDC

        • 0.5% used to buy back and burn USTC
        • 0.5% used to buy back and vault
        • 1% USTC mint premium is sent to the CMM vault

  • USTC’s role:

    • Continuous buyback + burn pressure on every mint
    • Acts as a secondary buffer via the CMM vault
    • Used for peg defense and system rebalancing

  • Liquidations:

    • There is no undercollateralized lending risk

    • USTCC is fully redeemable against USDC

    • Minimum redemption: 10,000 USTCC

      • Protects against bank-run behavior
      • Ensures redemptions are handled by arbitrageurs, not panic sellers

  • Yield:

    • No protocol yield promises
    • The only built-in yield today is for liquidity providers, earning ~0.2–0.3% per swap
    • No redemption fee

The whole mechanics of this new USD Stablecoin will operate exactly like the rest of the Forex stablecoins. Over collateralized and using a trusted proven and battle tested approach to stablecoins. Note that the 2% premium is only for Mint. Once in the pools there are no other fees and trades freely. This new stablecoin will be the first L1 stablecoin in all of Cosmos and will bring on easier adoption. Why this instead pf USDC? Every mint of USTCC raise price of Ustc while also reducing supply and raising marketcap of the Lunaclassic blockchain. For every 1$ vaulted a 1$ stablecoin is created adding 2$ to LunaClassic ecosystem. Now do this with all other 21 stablecoins weve got a party!
Lastly the advantages of this new collateralized stablecoin is we begin with 0$ in debt. Only funding we need is USDC to mint and collateralize the coins and throw them in a pool to be traded :saluting_face:

17

There is no native income、 2% loss upon minting. What is the core underlying logic that makes users willingly exchange USDC for USTCC and hold it for a long time?

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If you can buy a USTCC in a pool with USDC 1/1 youll likely buy it right?

That will constantly make the price above 1/1 in the pool which then makes that mint cost much less or even at profit. Very often onchain with 30-40k in liquidity even USDC swings 3-4% its not uncommon. You add USTC pools and LUNC pools to the mix now you have pool prices swinging daily with more arbitrage gain potential. Once in the pools there a no premium

You also have to take into account that every USTCC Mint directly grows the Marketcap of the LUNC ecosystem. We add 2.015$ with every mint of 1 USTCC to the cap. 1.015$ is vaulted and 1$ Stablecoin is created. Instead of using USDC now we grow our own brand. Which is also going to be adopted by the rest of cosmos which then offers arbitrage opportunities cross chain using IBC seemlessly with the new SDK 53 upgrade. Can forget that this burns USTC and Buys it back which also contributes to the revival and renewal of USTC. A team effort that will make a difference on this chains value.