About UST depeg

I’m evaluating to deposit some UST in " Earn " section (nothing more, no borrow, etc), just staking UST for getting the ~20% APY. Stop. Just to keeping it less risky as possible.

My question is: what are the major risks? I read about smart contract bugs and UST depeg . Is correct or there’s more?

In particular, what happens to my UST in case of UST depeg? I lost all or just will decrease the APY? So in this case not so risky at all.


In case of a catastrophic depeg, you may not be able to convert your UST to real money, period. Otherwise you will be able to get whatever is the current value of UST in another major stablecoin (e.g. 0.87 USDT for UST), and then you trade that major stablecoin for USD (if the other SC is also depegged, then you lose more in the process).

While not a risk of losing your UST deposit per se, do keep in mind that the yield reserve runs out in some two weeks, so the APY will come done crashing hard.

The yield reserve went from (where a good portion of the 19.5% APY comes from) went from nearly 70M a month ago to 20M now, Grafana

30M a week ago to 20M now, Grafana

So in about two weeks it runs out. That is probably the biggest risk, as it’s hard to predict what will happen when the reserve runs out. If there is a mass exodus, it will exert pressure on the UST peg. Will it break it or not? No one knows.


@Real1 Thanks, super clear. :ok_hand:

What about an insurance? Don’t know if actually there’s one for Anchor. It could be a solution to protect our UST?

Yes, there is insurance. Only for smart contract risk, not depeg. It is usually short term only (like 3 months, but some may be up to a year - you pay upfront, so if you stop using Anchor during it’s term, what you paid for it is lost), not auto renewing (so if things go awry, it’s not going to be available, and you never know can your renew when the time comes or will it be “sold out” as it usually is), very expensive (if yield goes down, you may only get net some 4% after insurance cost), and very limited. It only pays you in UST. So if there is a major black swan event, what you get is worthless. That’s at least my opinion.

There is no true insurance, like by an actual underwritten insurance company that pays you out in USD. Such a product doesn’t exist (likely too risk high for any real insurance company to get involved).

Most crypto “insurance” is provided by organizations where the token holders have to vote to pay you in case of a covered event (can you guess how they are motivated? if they pay you, they make less profit - so payouts are usually voted against). There is also Risk Harbor “Ozone” insurance that is not subject to vote (that’s better), but it is very narrow scope (has to be more than 15% lost, very specific smart contract risks only), and covers only some 8x% of your principal, doesn’t cover your gains, and not even your full principal value, and pays at a far lower value of aUST than the real value. The whole insurance is smart contract. Payout is also via smart contract. So by buying insurance for Anchor smart contract risk you are subjecting yourself to the insurance smart contract risk (e.g. in case of covered event, if “smart contract says no” then you get nothing).

Read more of TFL sponsored (they gave a lot of money on this to Risk Harbor apparently) Ozone insurance by Risk Harbor here: https://www.reddit.com/r/terraluna/comments/s0xywq/ozone_insurance_what_does_tfl_and_risk_harbor/

It also has a response from Risk Harbor there.

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