Terra’s parent company, Luna Foundation Guard (LFG), has been buying Bitcoin in large amounts in order to tie BTC to their stablecoin UST.
Surpassing Nakamoto
Do Kwon, the creator of Terraform Labs, recently stated that he is eager to surpass Satoshi Nakamoto as the second-largest Bitcoin holder.
However, many individuals worry about future liquidity as a result of this massive accumulation by a single corporation. Do Kwon responded by saying that Bitcoin is “liquid” enough to manage any potential depreciation of the UST stablecoin.
On Monday, April 4, during an interview with Bloomberg Quicktale, Kwon issued a statement. He believes that people should have a little more faith in cryptocurrency. When consumers look at Bitcoin, it is worth more than US$20 billion per day. He believes it will become even more liquid over time.
Kwon went on to say that even if a stablecoin de-pegged over time, the reserves would preserve the peg. He believes that (the Bitcoin market) will be able to absorb any new Bitcoin that enters the market.
Terra intends to have $10 billion in Bitcoin on hand to act as a backup for its decentralized UST stablecoin. Last month, the Luna Foundation Guard successfully completed a $1.5 billion Bitcoin purchase.
A Different Approach
Terra’s native stablecoin, UST, is currently ranked third in terms of market capitalization. The TerraUSD (UST) uses a different strategy than the top two stablecoins, USDT and USDC.
USDT and USDC are centralized stablecoins with a fiat currency directly tied to them. Terra’s UST stablecoin, on the other hand, keeps its peg by burning LUNA tokens.
The addition of a Bitcoin reserve will bolster UST’s capacity to keep its dollar peg. The most crucial thing to know about Terra, according to Kwon, is that it is a decentralized stablecoin with no issuer. If they are holders of something like centralised collateral bonds, Tether stablecoins, or (Circle’s USDC), whoever held the most of these reserves would be vulnerable to censorship. It would defeat the whole point of having a decentralized stablecoin to begin with.
LUNA has been one of the market’s best-performing cryptocurrencies. Since the LFG began purchasing Bitcoin, the LUNA price has increased by more than 100 percent in the last month. As of press time, LUNA, the seventh-largest cryptocurrency, is trading near its all-time high of $116. It has a $41 billion market capitalization.
An Ambitious Goal
Kwon is now working toward a lofty aim of becoming the UST the world’s largest stablecoin. It is currently the third-largest stablecoin, behind USDT and USDC, and the 14th-largest cryptocurrency by market capitalization. Terra’s goal, he stated, is to become the largest decentralized cryptocurrency, period.
The goal isn’t to become the largest stablecoin on the Terra blockchain, therefore they’re branching out into other ecosystems including Solana, Avalanche, Ethereum, and Polygon.
They intend to be present wherever developers and users congregate.
