Terra Tokenomics Lead to Market Surge, Bitcoin Reserve Hinted
The recent movements in the treasury of Terra, a decentralized financial payment network, which is now burning more than $4 billion worth of LUNA due to a governance proposal, have seemingly made the price of the asset rise to all-time high (ATH) levels. This rise has been also accompanied by new proposals to further cement the stability of its stablecoin, UST. Do Kwon, head of Terraform Labs, hinted at the inclusion of a bitcoin reserve to safeguard UST’s dollar peg. LUNA Booming
The recent changes in the issuance model of Terra, which were brought by the recent Columbus 5 update, seem to have been successful in fostering the growth of the currency of the network, LUNA. The price of its native asset, LUNA, has grown significantly, reaching ATH levels at $69.59 yesterday, recording an increase in the price of more than 50% during the last week. One of the most interesting choices taken by the cryptocurrency project was the burn of more than $4 billion worth of LUNA that was held in the community pool of the project.
These LUNA tokens have been exchanged constantly for UST, the sibling stablecoin of the project, and are now waiting to be used for other purposes. This was part of a change in the issuance model of UST. New Hybrid Model Hinted
Until now, there are no other tokens used as collateral to back the value of the UST stablecoin. This might, at some times, cause that the peg with the underlying currency (the U.S. dollar) to be lost due to different reasons. Due to the limitations of the model and the incentives to maintain the token peg in some situations, Terraform Labs CEO Do Kwon has hinted at the introduction of other solutions to address this issue.
Do Kwon stated in a recent Twitter thread:
I’ve grown quite tired of arguing with idiots on Twitter on whether UST can remain stable in bear. So soon I will propose creating multi billion dollar reserves in decentralized assets (BTC and others) in an attempt to save myself time.
If this really comes to happen, Terra would become a hybrid project, featuring a reserve that would back the value of the UST stablecoin in bear markets. Also, Kwon hinted at the use of the UST locked in the community pool as insurance for the currency and to also serve as backing to protect the UST from a possible de-peg.
Editor’s Note: Since the time of writing, markets have taken a significant downturn on December 4, with terra (LUNA) now down over 17% in the last 24 hours. Tags in this story Bitcoin, Burning, columbus 5, do kwon, issuance, LUNA, Peg, Stablecoin, Terra, UST
What do you think about the recent rise of Terra in the market? Tell us in the comments section below. Retail Giant Newegg Unveils Shiba Inu Support on Massive Billboard: SHIB to Be Accepted for Payments in December ALTCOINS | 4 days ago Study: 8.3% of Polled South Africans Own NFTs, a Further 9.4% Plan to Buy ALTCOINS | 6 days ago
Image Credits: Shutterstock, Pixabay, Wiki Commons Previous articleECB Paper Marks Success Factors for CBDCs, Digital Euro Next articleMetaGods Raises $3M Investment to Develop Play-to-Earn 8-Bit Action RPG Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article. Read disclaimerShow comments More Popular NewsIn Case You Missed ItNigerian Crypto Exchange Raises Over $4 Million in Latest Funding Round
A Nigerian crypto exchange, Busha, recently raised over $4 million in a funding round led by Jump Capital. Busha, a Nigerian cryptocurrency exchange, is reported to have raised a $4.2 million seed funding round recently. These funds, according to the ... read more.Paytm Founder: Crypto Is Here to Stay and Will Become Mainstream in 5 Years Crypto Stamp Crashes Swiss Post’s Online Store With Launch Day Demand Kevin O"Leary on SEC v Ripple Lawsuit Over XRP: "I Have Zero Interest in Investing in Litigation Against SEC" Bitcoin"s Hashrate Dips, Mining Difficulty Expected to Decrease for First Time Since July