- The founder of blockchain company Terraform Labs, Do Kwon, said the firm plans to buy $10 billion worth of Bitcoins to ensure the stability of the Terra USD (UST) staple.
- Terra is a decentralized blockchain platform that specializes in steblecoin mining, Its Terra USD (UST) is an algorithmic stablecoin pegged to the value of the U.S. dollar, with the value of the dollar partially supported by an equivalent amount of its native LUNA token.
Do Kwon, the founder of blockchain company Terraform Labs reported on the firm’s plans to buy $10 billion worth of Bitcoins (BTC) to ensure the stability of the Terra USD (UST) stabelcoin. He tweeted:
$UST with $10B+ in $BTC reserves will open a new monetary era of the Bitcoin standard. P2P electronic cash that is easier to spend and more attractive to hold
Terra buys Bitcoin for reserves
Kwon explained that the Bitcoin reserves will serve as additional support in case Terra USD owners start exchanging coins en masse for other stablecoins. According to Kwon, the company will continue to build up reserves until it becomes mathematically impossible for ‘idiots’ to claim de-peg risk for UST.
On March 17, Kwon confirmed that Terraform Labs had already begun purchasing Bitcoins. He did not name the number of coins purchased. Furthermore, he did not say how long the company plans to accumulate the $10 billion worth of coins.
To see if plans were already underway, or it was just a thought at this stage, and the founder simply replied:
I don’t understand the distinction, We’re already buying Bitcoin.
In a tweet shortly after, Kwon also noted that:
We start buying BTC and Twitter verifies me, I see you Jack,
Also read: Jack Dorsey thinks BTC will replace the USD
Luna Foundation Guard, which issued the cryptocurrency Terra (LUNA), also wants to invest in Bitcoins. The firm plans to exchange LUNA for UST, sell the stablecoins to the Curve pool, and purchase Bitcoins with the proceeds. Like Terraform Labs, Luna Foundation Guard will store the coins.
LFG will swap the $luna to $ust (swap=burn) and sell the $ust to the curve pool. The proceeds will go back to LFG reserves to purchase #btc.
L F G 🚀🚀🚀
— LFG | Luna Foundation Guard (@LFG_org) March 9, 2022
Terra (Luna) notes
As a reminder, Terra’s goal is to become a reliable bridge between fiat and cryptocurrencies. The main drawback of decentralized currencies such as Bitcoin is high volatility. This prevents Bitcoin from being accepted as a means of payment. The main drawback of stabelcoins is centralization and the possibility of uncontrolled issuance.
Terra solves both of these problems, that is, UST is decentralized, and its issuance is linked to LUNA by a mathematical algorithm and does not depend on the will of the publisher.
To get a UST, the user has to burn the corresponding amount of LUNA. If the demand for USTs grows, LUNA validators’ remuneration increases and the money supply grows. If there is a surplus of coins, some of them are burned by the system.
As of this writing, Bitcoin is trading at $40,814, up 2.85 percent on the day. LUNA is trading in a sideways range at $88.62. UST is currently the third most stable coin after USDT and USDC. Its market capitalization of more than $15 trillion.
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