Terraform Labs (the company responsible for Terra) has made a donation to help support Terra (LUNA). Do Kwon is the CEO of Terraform Labs. The company donated 12 million LUNA, which amounts to approximately $1.2 billion, to Luna Foundation Guard. This goal was to allow it to increase its central forex reserve in order to respond to market stressors if required.
Terraform Labs fills LFG vaults
Terraform Labs is the creator of Terra token. It has now committed funds to support the growth of its stablecoin, UST. The company announcedLuna Foundation Guard receives a 12 million LUNA new donation. This will go to growing the stabilization funds to preserve the USTdollar peg.
Do Kwon is Terraform Labs CEO. He explained that this money will be used burn and mint $UST. Then, it will be used by the Luna Foundation Guard to increase its reserves. Due to high stablecoin demand, the Luna Foundation Guard is working directly to increase UST in secondary markets.
The foundation actually acted just last month twice to replenish the supply UST in Curve’s pools. Curve is a decentralized exchange that allows stablecoin traders low slippage and has low cost of transaction.
The UST Depeg Dilemma
All of this is done to improve user trust in UST’s stability and peg to USD. Other stablecoins can maintain the peg with different systems. UST, however, relies on its relationship to Terra token LUNA and the arbitrage possibilities that the treasury provides traders.
Analysts have indicated that the protocols can be faulty, causing an imbalance which could lead to UST losing its peg. Kwon is emphaticIt is important to mention the goal of the donation.
We’ll keep adding to our reserves until the depeg risk is mathematically unattainable for anyone who has any doubts. UST.
Kwon also insists on the necessity of these reserves to be stored in BTC. This asset is not internal to Terra. according to him, “thrives in chaos.”
Let us know your thoughts on the Terraform Labs donation of 12 million LUNA to Luna Foundation Guard. Comment below.
Image creditShutterstock. Pixabay. Wiki Commons
DisclaimerThis article serves informational purposes. This article is not intended to be a solicitation or offer to sell or buy any product, service, or company. Bitcoin.com doesn’t offer investment, tax or legal advice. The author and the company are not responsible for any loss or damage caused or alleged caused by the content or use of any goods, services, or information mentioned in the article.