The Diary Game 26/03/2022 - LUNA Foundation Guard raises $ 2.2 billion to buy bitcoin for UST reserve fund.

alein (70)memberin Italy • 3 years ago

Recently, Terra ($ LUNA) founder Do Kwon said that Luna Foundation Guard (LFG) raised $ 2.2 billion to create a Bitcoin ($ BTC) reserve for the stable Terra (UST) currency. The announcement came shortly after LFG raised $ 1 billion through a private sale.

Terra is a Proof of Stake (PoS) blockchain, in which LUNA is used to maintain the exchange rate of the algorithmic stablecoin in USD. Although UST is not backed by any reserve assets, its value is fixed by creating and burning LUNA, as users can always exchange 1 USD of LUNA for 1 UST and vice versa.

In addition, if the UST price falls below $ 1, this stable currency can be exchanged for LUNA and sold for $ 1, making the Terra token ($ LUNA) attractive to arbitrage traders. If it exceeds the $ 1 mark, LUNA token holders can trade the token for 1 UST to make a profit. So LUNA is created and burned to make these transactions.

The $ 1 billion round of financing was led by Jump Crypto and Three Arrows Capital, and the reserve is set to increase UST's stability. Because the value of Bitcoin has little correlation with the Terra ecosystem, the reserve in it is expected to minimize the risk of potential problems for the UST in many unfavorable scenarios.

Earlier, Do Kwon argued that Terra Protocol would be one of the largest holders of Bitcoin, as the reserve of the project is BTC, which is built as an additional layer of security for decentralized stable currencies. In particular, Terraform Labs plans to accumulate $ 10 billion worth of Bitcoin to add to its stable currency reserves.

To this end, Terra is likely to spend part of its revenues from issuing USTs to accumulate more BTC. In addition, Do Kwon also proposed that LFG create a blockchain bridge to bring billions of dollars worth of encrypted BTC into the Terra network.

Terra is a decentralized blockchain platform specializing in stable currencies. The project's USD USDT is a stable algorithmic currency against the US dollar. The USD value of the stablecoin is partially maintained by an equivalent amount from the native LUNA token.

On March 14, founder Do Kwon posted on Twitter that Terra will not sell its original LUNA asset to build a reserve, and more details will be available in the near future. In addition, Kwon also pointed out that stablecoin TerraUSD (UST) will continue to be supported by $ 10 billion in BTC. The event will open a new era of money according to Bitcoin standards.

Cointelegraph contacted Kwon to see if the above plan was already underway or just an idea, and the founder replied:

"I bought Bitcoin."

When a Twitter user asked Kwon what the BTC reserves would be used for, he said the funds would be used to support short-term UST redemptions and a decentralized foreign exchange reserve. This is the second time this month that Kwon has introduced a reserve consolidation plan that supports stable Earth currencies. According to Coingecko, UST's market capitalization is currently $ 16 billion.

In the last 17 days, LUNA has increased by over 64%, while Ethereum has decreased by about 15% in the same period. Terra is a blockchain protocol that uses stable currencies linked to their payment ecosystem. The project currently offers a variety of stable currencies related to the US dollar, the Korean won, the Mongolian tugrik and others.