The nonprofit group targeted on the open-source stablecoin community behind Terra USD, Luna Basis Guard, has closed on a $1 billion elevate by way of the sale of LUNA tokens.
In a Tuesday tweet, Terra said Leap Crypto and Three Arrows Capital led the $1 billion spherical with participation from DeFiance Capital, Republic Capital, GSR, Tribe Capital and others. The platform stated proceeds from the sale — $1 billion — would “go in the direction of establishing a Bitcoin-denominated Foreign exchange Reserve for UST,” a stablecoin within the Terra ecosystem.
1/ The lengthy awaited [REDACTED] 3 is right here!
— Terra (UST) Powered by LUNA (@terra_money) February 22, 2022
“One widespread criticism of algorithmic stablecoins is their reflexive nature and the hypothetical threat of a “financial institution run” state of affairs the place demand to promote the secure outstrips provide in a manner that causes compounding worth decreases in each native tokens,” stated Terra. “Though the widespread adoption of UST as a constantly secure asset by way of market volatility ought to already refute this, a decentralized Reserve can present a further avenue to keep up the peg in contractionary cycles that reduces the reflexivity of the system.”
Terra stated it selected to denominate the Foreign exchange Reserve in Bitcoin (BTC) as a result of it thought of the crypto asset “much less correlated to the Terra ecosystem.” The platform stated that extra particulars on the UST reserve’s operate and design could be launched within the coming weeks.
The protocol’s web site said it makes use of “primary market forces of provide and demand” to keep up a secure worth for cash together with UST:
“Stablecoins are solely beneficial to customers in the event that they preserve their worth peg […] When the demand for Terra is excessive and the provision is restricted, the value of Terra will increase. When the demand for Terra is low and the provision is simply too massive, the value of Terra decreases.”
Based mostly in Singapore, the Luna Basis Guard, or LFG, was launched in January to develop the Terra ecosystem and enhance the sustainability of its stablecoins. On Friday, Terraform Labs founder Do Kwon announced the injection of 450 million UST — roughly $450 million — into the Anchor protocol’s reserves following a vote by the LFG.
On the time of publication, the value of Terra (LUNA) is $54.03, having risen by greater than 1.7% within the final 24 hours. The community hit an all-time high of greater than $20 billion in whole worth locked in December 2021.