Hi @MagicalTux ,
An asset is something that is considered property. It can be positive or negative (for instance having a building that has intrinsic value, but needs more repairs than it is worth would be a negative asset). For this reason property, whether real, personal, or intangible, including currency is considered an asset. Normally, if you pay taxes on it, it is an asset. Since cryptocurrency is normally considered intangible property as a commodity, a security if it is an ICO, and since El Salvador has officially adopted Bitcoin, that cryptocurrency can now be considered either as intangible property or foreign currency. Both LUNA and UST fit in one of each of these categories, they therefore are assets.
A liability is something a person or company owes such as a bill, debt, and expenses. They also can be either negative or positive. For instance, if you received a discount or refund on a bill, it would be considered a negative liability.
Equity is the difference between an asset and a liability.
So the liability happens at the point of sale of the assets between LUNA and UST in exchange for one another (since at that point you owe something, and that debt is the liability, which is paid with an asset). Since the community pool consists of both assets, I believe, and the pegging mechanism uses a buying and selling of sorts between the two cryptocurrencies in order to peg UST at a specific monetary value, the place where value may enter or consider both pools would be equity (the net value between them), even if that equity in a perfect world would be $0 (which it rarely is).
The formula is Asset (A) - Liability (L) = Equity (P).
I hope that helps out to see why I mentioned that point (which was mentioned actually as a point from my comment in 8 Steps to Save Luna now - Economic Refactoring Proposal from industry professionals , since I reused part of my comment from there). I did not disagree that LUNA was the governance coin, and that it was primarily the reserve, but in monetary policy if you have a reserve, you can extend it (which pours currency onto the market but diminishes the buying power that underlies that currency - one economist called it a way of taxing people without ever having to go through Congress) and you can retract it (which makes currency more scarce and enables the demand to become higher and the supply to gain in value). Both are needed in a reserve system. In the same way, in this reserve system, both LUNA and UST backup the value of one another, and they interplay off of each other’s value - even though if it works well, the community reserve LUNA would always be contracting in supply when UST gets to high in value, and LUNA would be extended in supply when UST gets too low in value (one is always buying / trading with the other to keep UST pegged, looking for that perfect, and difficult to maintain, balance).
That is why I mentioned the issue about assets, liability, and equity. I hope that helps out a little bit.
I hope you have a great weekend 