Category: Business

An announcement made by Singapore-based Terra and the Luna Foundation Guard (LFG) which is a nonprofit organization designed to support the Terra network to build and promote a decentralized economy. It claimed of raising $1 billion in a private token sale of LUNA led by Three Arrows Capital headed by Ethereum critic Su Zhu and Jump Crypto. The trading group that led the raise was also responsible for Solana cross-chain bridge Wormhole whole after a $320 million hack. The foundation did not say anything about the specifics of the raise or whether the funds were raised directly in Bitcoin. As per LFG, the funds will be used to create a UST Forex Reserve denominated in Bitcoin for the biggest stablecoin on the Terra chain, TerraUST, Depending on when the raising took place, the value would be under $1 billion due to the market downturn. As a result of this $1 billion, which will be locked up for a vesting period of four years, it will be used as a release valve for UST redemption to maintain the USD peg. To maintain its peg UST which is a stablecoin uses Terra's LUNA. Terra explained that the decision to develop a forex reserve for UST was due to the criticisms that algorithmic stablecoins have faced. Non collateral stablecoins can experience sudden price drops in a situation where the supply of the token outpaces the sale of the token. Terra stated, “Although the widespread adoption of $UST as a consistently stable asset through market volatility should already refute this, a decentralized Reserve can provide an additional avenue to maintain the peg in contractionary cycles that reduces the reflexivity of the system.” Terre explained that it will work so that the algorithm will maintain the supply of the tokens based on the fluctuation in the price of the coins, issuing more when the prices rise, and reducing when the prices fall.