Terra has its back with Bitcoin
Do Kwonthe founder and CEO of the Terra (LUNA) blockchain, announced on Twitter that Terra’s stablecoin, UST, will now be insured up to 10 billion dollars 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 at the UST which is its algorithmic dollar-backed stablecoin, but also in order to allow Terra to have a decentralized pool of funds.
US$ 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 #btc
— Do Kwon ? (@stablekwon) March 14, 2022
At this point, few details have been revealed. It is not yet known how this reserve of Bitcoin will be stored, but Do Kwon has however announced that this new measure announces a “ new era of 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 against the dollar rate.
To a user who asked if Terra already owned Bitcoin, and if so how high, Do Kwon replied that Terra already owned more than $3 billion worth of cryptocurrency.
? To go further: What is a stablecoin?
The UST victim of its success
Note that this is the second consolidation of Terra’s reserve system in the past 30 days, as Terraform Labs, Terra’s parent company, had to inject $1.1 billion in the form of LUNA tokens into its reserves given 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 the UST is due to the Anchor protocol, which currently makes it possible to obtain 19.5% return on the USTwhich is currently the highest rate for a stablecoin staking strategy.
Only, to be able to claim to provide a stablecoin, it is necessary to be able to have its equivalent in reserve. Thus, Anchor’s supply needs to be replenished from time to time, as this graph shows.
Reserve of funds to ensure the Anchor protocol
The UST currently occupies the 14th place on the podium in the ranking of cryptocurrencies with over $15 billion in market capitalization, closely trailing Dogecoin (DOGE) which is now only a few hundred million dollars ahead.
? To read also: Terra (LUNA) becomes the 2ᵉ blockchain of decentralized finance (DeFi)
Graphic source: Grafana
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About the Author : Maximilien Prue
Passionate about the world of decentralized finance and the novelties brought by Web 3.0, I write articles for Cryptoast to help make the blockchain more accessible to everyone. Convinced that cryptocurrencies will change the future very soon.
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