Luna Foundation Guard raises $1B to form UST reserve denominated in Bitcoin

The not-for-profit company concentrated on the open-source stablecoin network behind Terra USD, Luna Foundation Guard, has actually closed on a $1 billion raise through the sale of LUNA tokens.


In a Tuesday tweet, Terra said Jump Crypto and Three Arrows Capital led the $1 billion round with involvement from DeFiance Capital, Republic Capital, GSR, Tribe Capital and others. The platform stated earnings from the sale — $1 billion — would “go towards establishing a Bitcoin-denominated Forex Reserve for UST,” a stablecoin in the Terra environment.

“One common criticism of algorithmic stablecoins is their reflexive nature and the hypothetical risk of a “bank run” scenario where demand to sell the stable outstrips supply in a way that causes compounding price decreases in both native tokens,” stated Terra. “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.”

Terra stated it picked to denominate the Forex Reserve in Bitcoin (BTC) due to the fact that it thought about the crypto property “less correlated to the Terra ecosystem.” The platform stated that more information on the UST reserve’s function and style would be launched in the coming weeks.

The procedure’s site said it makes use of “basic market forces of supply and demand” to preserve a steady cost for coins consisting of UST:

“Stablecoins are only valuable to users if they maintain their price peg […] When the demand for Terra is high and the supply is limited, the price of Terra increases. When the demand for Terra is low and the supply is too large, the price of Terra decreases.”

Related: Cointelegraph Consulting: A take a look at Terra’s environment

Based in Singapore, the Luna Foundation Guard, or LFG, was introduced in January to grow the Terra environment and enhance the sustainability of its stablecoins. On Friday, Terraform Labs creator Do Kwon revealed the injection of 450 million UST — approximately $450 million — into the Anchor procedure’s reserves following a vote by the LFG.

At the time of publication, the cost of Terra (LUNA) is $54.03, having actually increased by more than 1.7% in the last 24 hr. The network struck an all-time high of more than $20 billion in overall worth secured December 2021.