Recent movements in Terra’s treasury, a financial network that is decentralized, has seen the value of the asset reach an all-time high. The rise in price has also been accompanied by proposals that further strengthen the stability UST’s stablecoin. Do Kwon, head of Terraform Labs, hinted at the inclusion of a bitcoin reserve to safeguard UST’s dollar peg.
New changes in Terra’s issuance system, introduced by Columbus 5 Update, appear to have had an impact on the rise of LUNA (the currency in the network). The price of the native currency, LUNA (the cryptocurrency), has increased dramatically, hitting ATH levels of $69.59 yesterday. It also recorded an increase of over 50% in price during the week. The most surprising decision made by the cryptocurrency project was to burn more than $4 billion of LUNA which was stored in its community pool.
These LUNA tokens are currently waiting to be exchanged for UST, which is the sibling stablecoin. It was part of a new issuance method for UST.
New Hybrid Model Hinted
Until this point, no other tokens have been used to secure the UST stablecoin’s value. The peg with U.S. dollars might be lost at times. Do Kwon, Terraform Labs CEO has suggested that other solutions might be considered due to limitations in the model and incentives to keep the token peg intact in certain situations.
Do Kwon statedIn a Twitter discussion:
I’ve grown quite tired of arguing with idiots on Twitter on whether UST can remain stable in bear. In an effort to save time, I’ll soon propose to create multi-billion dollar decentralized assets reserves (BTC and other) as a way of saving my time.
Terra could be a hybrid project with a reserve to support the UST stablecoin’s value in bear markets if this happens. Kwon also suggested that the UST in the community pool could be used as an insurance policy for the currency, and as a backing mechanism to prevent the UST’s 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.
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