The Terra Founder Directs the Terra Ecosystem to Bitcoin
In a recent
Twitter space shared with bitcoin enthusiast Udi Wertheimer, Terra founder Do
Kwon hinted at a future purchase of $3 billion worth of bitcoin to supply the
reserves of the protocol. In the same space, Do Kwon explained the new
mechanics that the Terra ecosystem is introducing in order to use bitcoin as
collateral for its flagship decentralized stable coin, UST.
In a Twitter
space hosted by Udi Wertheimer, Do Kwon, founder of Terra and Terraform Labs,
made some important announcements regarding the future of the Terra ecosystem
and its tokens. One of these announcements has to do with the inclusion of new
token mechanics that take into consideration some form of bitcoin in the Terra
ecosystem. Kwon has announced that Terra is working toward bringing a form of
tokenized bitcoin to the Terra blockchain in the most decentralised form
possible.
Terraform
Labs was founded by Do Kwon and Daniel Shin in 2018 and is the start-up behind
the Terra ecosystem. The ecosystem is a rapidly growing network of decentralised
applications. It has resulted in sustained Terra demand and rising Luna
prices.
It keeps its peg to the US dollar by relying on a network of
arbitrageurs to purchase and sell Terra's cryptocurrency, LUNA. Also a
governance token, LUNA gives holders control over the system through voting.
Terra's value almost doubled in February, rising from a low of $47 to $91. It
spiked sharply around the start of the Russia-Ukrainian conflict.
Terra is a
public blockchain technology that uses a set of algorithmic, decentralised
stable coins to power a vibrant ecosystem that makes DeFi accessible to the
general population. These days, so-called stable coins like Terra have gained considerable prominence in the public domain. Many people look to invest in these because of
their more predictable prices. It is also notable that cryptocurrencies like
Bitcoin and Ether have fluctuated in value over the last several months.
Kwon also
explained that with the inclusion of bitcoin, UST would become a hybrid stable
coin, allowing users to exchange $1 worth of UST for $0.99 worth of BTC. This
would effectively allow users to redeem BTC by using UST for a premium of 1%,
almost in the same way that LUNA is being used right now. Kwon clarified that
these mechanics will be explained in the near future in a more detailed way.
When asked
about why Terra chose Bitcoin as a reserve asset, Kwon stated:
I mean, a
couple of reasons here, but put simply, bitcoin is the only hard reserve asset
that’s been proven out of the digital currencies. It is very difficult for
somebody in crypto to question bitcoin.
Kwon expects
this new tokenized version of bitcoin in the Terra ecosystem to become the de
facto reserve currency of many protocols built on top of the chain, expanding
to be part of every smart contract application that holds any treasury. In
light of this, Kwon announced some numbers regarding the amount of bitcoin
Terra will purchase in the short term. The Terraform Labs CEO stated that the
company has a budget to buy $3 billion worth of bitcoin in the short term and
announced that most of this bitcoin has not been bought yet.
Do Kwon concluded by announcing that the protocol plans to become a regular buyer of bitcoin. The Luna Foundation Guard will be used for the aforementioned purpose.
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