Group items tagged

One model of Terra goes like this: (1) Terra is a company. Not really - it's a decentralized finance ecosystem, a blockchain, a bunch of independent developers working on diverse projects - but let's just pretend for a minute. (In fact there is a company-ish thing called Terraform Labs which helps run Terra, and another company-ish thing called Luna Foundation Guard that keeps some of Terra's money, but here I want to conceive of Terra as a whole as sort of a distributed company.) (2) The Luna token, which powers the Terra blockchain and is the currency of its ecosystem, is the equity of Terra, the stock in the Terra company. (3) The TerraUSD stablecoin (or UST), which was supposed to always be worth a dollar, and which maintained that peg by being exchangeable for $1 worth of Luna at market prices, is the debt of Terra. Like bonds of the company, or like deposits of a bank.

There is a total of about 11.2 billion circulated supply of TerraClassicUSD (USTC), currently trading below $0.04. About 1 billion USTC remaining in Terra's community pool will be sent to the burn module and immediately discarded from supply. Terra will then bridge 371 million cross-chain USTC from Ethereum to Terra which will then be burned by Terraform Labs. "Eliminating a significant chunk of the excess UST supply at once will alleviate much of the peg pressure on UST," the proposal said. The Terra governance has voted to create a new chain, which will ditch the algorithmic stablecoin USTC (formerly UST) in the old blockchain which has been renamed Terra Classic.

Terra announced its stablecoin issuance protocol would act as Mongolian messaging app memeChat's new financial backbone. That app, which has attracted 50,000 users since its March launch, now features the Terra-backed memePay payment service as well.

"The basic thing that makes Terra valuable is confidence in it. The essential source of this confidence is ... just sort of recursive social belief? If you think that everyone else will treat Terra as worth a dollar, then you will treat it as worth a dollar, and you won't sell it for $0.90 in a panic, which means that it won't go down to $0.90, etc. But if you think that everyone else will treat Terra as worth zero, then you will dump it as fast as you can at whatever price you can get, which means that it will go down below $0.90, etc."

Terraform Labs announced that the blockchain's miners had decided to halt the Terra blockchain in order to "prevent governance attacks" following "severe [luna] inflation." Later, Terra said validators are working to restart the network "in a few minutes.

This article will present a layman overview of what is terra luna in crypto and where is this heading towards.

"Terra is a layer-1 blockchain platform that supports smart contracts and enables the creation of various stablecoins. It aims to serve as a base layer for the fintech ecosystem. These stablecoins are stabilised by algorithms and are used for payment purposes. They run on a seigniorage mechanism."

"Terra is a Cosmos-based protocol that powers a suite of algorithmic stablecoins, which aim to maintain their pegs using a coin called LUNA."

"In a proposal put forward to token holders, Terra said that it wants to burn the nearly 1 billion UST (roughly $690 million) in the community pool while increasing the Base Pool of LUNA available to 100 million which in turn increases minting capacity to over $1 billion. This will help expedite the outflows of UST from the system, and thus pushing it back closer to its peg, while pushing down the price of Luna. "Currently, the burning of UST is too slow to keep pace with the demand for excess UST to exit the system, which is hindered by the BasePool size," reads the proposal. "Eliminating a significant chunk of the excess UST supply at once will alleviate much of the peg pressure on UST.""

"Though rumors about BlackRock and Citadel are just that, it does seem very plausible that some large mainstream hedge fund was involved in the Terra depeg. That would be a major double-edged sword. On the one hand, it would mean crypto is regarded as a robust and trustworthy enough ecosystem that mainstream finance is willing to risk shorting it. The emergence of more such shorts would, furthermore, benefit the ecosystem long-term by providing a profit motive for asking hard questions about projects."

The Bank of Thailand (BoT) has issued a warning against baht-denominated stablecoin Thai Baht Digital (THT), citing a sixty-year-old law, that makes the "creation, issuance, usage or circulation of any material or token for money is a violation of Section 9 of the Currency Act 1958." "Although THT is currently not used as a medium of exchange, it could cause fragmentation to the Thai currency system should THT or other similar stablecoins come to replace, substitute or compete with Baht issued by the BOT," the BoT noted. THT stablecoin is issued on the Terra platform which has produced various other stablecoins including the TerraUSD and TerraKRW. The Terra platform is also behind the chai payment app, an e-commerce wallet that is mainly used in Asia and powered by stablecoins. https://www.bot.or.th/English/PressandSpeeches/Press/2021/Pages/n1564.aspx

Terra is a three-year-old project from the South Korean developer Terraform Labs, built to support a basket of decentralized stablecoins. Demand has surged in cryptocurrency markets for Terra's LUNA token, which works as part of an automatic balancing system that helps to keep prices for the stablecoins, well, stable.

Terra's U.S. dollar-pegged stablecoin UST is now the #4 stablecoin on the market (about $9 billion) but it's very different from the three that sit above it. Tether's USDT ($77 billion), USD Coin's USDC ($42 billion) and Binance's BUSD ($15 billion) are run and managed by centralized entities, and the assets that back them (reportedly 1:1) are also centralized. However, UST is a decentralized stablecoin backed by other cryptocurrencies. Terra itself is a layer 1 smart contract-enabled network built using the Cosmos software developer kit, and UST is minted by users by "burning" (destroying) LUNA, Terra's native token responsible for paying transaction fees and participating in governance. DAI, the #5 stablecoin (just under $9 billion), is also cryptocurrency backed.

"Why do some stablecoins, such as Terra's UST, fail but others do not? Was Terra just an unlucky victim of a classic bank run or speculative attack? Or was its high-yield deposit offering doomed to fail like a Ponzi scheme? What is the limit of the stablecoin's algorithm? What makes payment stable? In this article, we'll dive into potential answers to these questions about the failed stablecoin."

"Terra built itself its own small 2008 financial crisis with "stable" assets built from chained boxes of worthless trash, and the whole thing fell over in a stiff breeze and crashed Bitcoin in the process."

"Do Kwon, the CEO of Terra creator Terraform Labs, was one of the pseudonymous co-founders behind the failed algorithmic stablecoin Basis Cash, CoinDesk has learned."

"Created as an algorithmic stablecoin, Justin Sun's Terra-like stablecoin USDD is now shifting gears towards a hybrid model with improved transparency. USDD is now reportedly over-collateralized with a collateral ratio of 226.1%, according to data from Tron DAO, the organization responsible for maintaining the collateral of USDD."

Anchor, a savings protocol on the Terra blockchain, is due to launch on March 16, according to a countdown clock on its website. Anchor will offer a principal-protected stablecoin savings product that accepts TerraUSD (UST) deposits and pays a stable interest rate. To generate yield, Anchor lends out deposits to borrowers who put down liquid-staked proof-of-stake (PoS) assets from major blockchains as collateral. Anchor's yield is thus powered by block rewards of major PoS blockchains.

"The collapse of Terra in May sent shock waves round the crypto world, triggering domino-like collapses of crypto companies. One of those companies was the investment fund Three Arrows Capital. At the time, everyone thought 3AC was a conservatively-managed investment company that was simply the unfortunate victim of an unforeseen event. If anyone was to blame for 3AC's collapse, it was Do Kwon. How wrong they were. "

Legislation to regulate stablecoins being drafted in the U.S. House of Representatives would place a two-year ban on coins similar to TerraUSD, the algorithmic stablecoin that collapsed earlier this year. It would be illegal to issue or create new "endogenously collateralized stablecoins." The definition would kick in for stablecoins marketed as being able to be converted, redeemed or repurchased for a fixed amount of monetary value, and that rely solely on the value of another digital asset from the same creator to maintain their fixed price.