The non-profit organization behind the open source stablecoin network behind Terra USD, the Luna Foundation Guard, has raised its capital by $ 1 billion through the sale of LUNA tokens.
In a tweet on Tuesday, Terra revealed that Jump Crypto and Three Arrows Capital have led a billion-dollar round involving DeFiance Capital, Republic Capital, GSR, Tribe Capital and more. The platform said that the proceeds from the sale – $ 1 billion – will go to building a bitcoin-denominated foreign exchange reserve for UST, a stable currency in the Terra ecosystem.
“One of the common criticisms of algorithmic stablecoins is their reflexive nature and default risk for a ‘bankrun’ scenario where the demand for selling stablecoins exceeds the supply in such a way that it results in a complex fall in the price of each of the original tokens” Terra . so. “Although the widespread use of above-ground reservoirs as a permanently stable asset due to market volatility should really counteract this, decentralized reserves can provide additional means to maintain the link in deflation cycles that reduce the reversibility of the system.”
Terra said they chose the Bitcoin (BTC) foreign exchange reserve rating because they believe the crypto asset is “less connected to the Terra ecosystem.” The platform said that more details about the function and design of floor tanks will be published in the coming weeks.
The protocol’s website states that it uses “fundamental market forces for supply and demand” to keep the price of currencies stable, including government bonds:
«Stablecoins are only valuable to users if they maintain a fixed price […] When demand for Terra is high and supply is limited, Terra’s price rises. When the demand for Terra is low and the supply is too high, the price of Terra falls. ”
Related topics: Cointelegraph Consulting: A look at the Terra ecosystem.
The Singapore-based Luna Foundation Guard, or LFG, was launched in January to expand the Terra ecosystem and increase the sustainability of its stack coins. On Friday, Terraform Labs founder Do Kwon announced a $ 450 million injection – about $ 450 million – into the Anchor Protocol reserves following a vote by the LFG.
At the time of going to press, Terra (LUNA) is worth $ 54.03, up 1.7% over the last 24 hours. In December 2021, the network’s total closed value reached an all-time high of over $ 20 billion.