Terra (LUNA) to set up $10 billion reserve in Bitcoin (BTC)

he Terra (LUNA) blockchain will have a reserve fund in Bitcoin (BTC), up to 10 billion dollars. According to Do Kwon, the founder and current CEO of Terra, this will in particular ensure the rear of the UST, its algorithmic stablecoin which continues to gain ground. Moreover, it will allow the ecosystem to acquire a considerable decentralized pool of funds.

Terra has its back with Bitcoin

Do Kwon , the founder and CEO of the Terra blockchain (LUNA), announced on Twitter that Terra’s stablecoin, UST, will now be insured for $10 billion in the form of Bitcoin (BTC).

According to him, the choice to have a reserve in Bitcoin is linked to two factors. On the one hand, the need to provide additional security to the UST which is its dollar-backed algorithmic stablecoin, but also in order to allow Terra to have a decentralized pool of funds .

At this point, few details have been revealed. It is not yet known how this Bitcoin reserve will be stored, but Do Kwon nevertheless announced that this new measure heralded a ” new era of the Bitcoin standard “, before briefly discussing electronic peer-to-peer payment.

Additionally, he also clarified that Luna’s reserves would remain intact and would not be impacted by this decision. Basically, part of the USTs are insured thanks to the LUNA tokens in reserve, which are used in particular to maintain the 1:1 ratio of the UST compared to the price of the dollar.

To a user who asked if Terra already owned Bitcoin, and if so how much, Do Kwon replied that Terra already owned over $3 billion of the cryptocurrency .

The UST victim of its success

Note that this is the second consolidation of Terra’s reserve system in the past 30 days, since Terraform Labs, the parent company of Terra, had to inject $1.1 billion in the form of LUNA tokens into its reserves against to the growing success of the UST. The demand was such at that time that pools of liquidity suffered imbalances on the Curve Finance protocol.

Most of the success of UST is due to the Anchor protocol, which currently provides 19.5% return on UST , which is the highest rate currently for a stablecoin staking strategy.

Only, to be able to claim to provide a stablecoin, you must be able to have its equivalent in reserve . Thus, Anchor’s supply needs to be replenished from time to time, as this graph shows.

Anchor

Reserve of funds to ensure the Anchor protocol

UST currently sits 14th on the podium in the cryptocurrency rankings with over $15 billion in market capitalization, closely following Dogecoin (DOGE) which is now only a few hundred million dollars ahead.

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