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Luna Foundation Guard (LFG) Raises $1 Billion for Bitcoin-Denominated Forex Reserve for Terra’s Stablecoin UST | News

SINGAPORE, February 22, 2022 /PRNewswire-PRWeb/ — The Luna Foundation Guard (LFG), a non-profit organization recently established to support decentralization, economic sovereignty, and foster the growth of the Terra ecosystem, has unveiled the closing of a $1 billion private token sale, one of the largest cryptocurrency industry sales to date, for use in establishing a Bitcoin-denominated UST foreign exchange reserve.

The sale was led by Jump Crypto and Three Arrows Capital (3AC), with participation from DeFiance Capital, Republic Capital, GSR, Tribe Capital and many others.

The UST Forex Reserve is an initiative to provide an additional layer of support using assets considered less correlated to the Terra ecosystem, initially with Bitcoin, but with plans to expand to other major uncorrelated assets in the market in the future. Reserve assets can be used in cases where prolonged market selling deters buyers from restoring UST peg parity and deteriorates the Terra Protocol’s open market arbitrage incentives.

“The UST Forex Reserve further bolsters confidence in the anchoring of the UST market’s leading decentralized stablecoin,” said Kanav Kariya, President of Jump Crypto. “It can be used to help protect the peg of the UST stablecoin under stressful conditions. This is similar to how many central banks hold foreign currency reserves to support monetary liabilities and protect against dynamic market conditions.”

As an algorithmic stablecoin, UST’s peg is maintained through a series of open market operations, arbitrage incentives, and countercyclical leverage within the Terra protocol to offset market forces pushing the anchoring of the UST above or below. one usd. LUNA, Terra’s reserve, staking and governance asset, maintains an elastic supply to help neutralize directional market pressures impacting peg. One of the common criticisms of algorithmic stablecoins is their reflexive nature during extreme volatility, where the incentives for arbitrage to bring the peg back to parity can potentially deteriorate. The UST exchange reserve offers an additional possibility to maintain ankle stability in contraction cycles, which reduces the reflexivity of the system.

The UST Forex Reserve functions as a relief valve for UST → LUNA redemptions on the Terra Protocol during periods of significant contraction in UST demand, providing additional avenues for arbitrage incentives to remain intact exogenous to the protocol Earth.

“With the UST Forex Reserve, the main counter-argument for the sustainability of algorithmic stablecoins is eliminated,” says Nicholas Platias, Founder of Chronos Finance. “The UST peg is backed by a pool of decentralized liquid assets, which function as a dynamic safety net driven by transparent mechanism design and arbitrage forces during periods of sharp contraction in UST demand.”

the $1 billion of the sale will initially capitalize the UST foreign exchange reserve, with buyers locking in the purchased LUNA over a 4-year vesting period. More details on the reserve’s function and design will be released in the coming weeks.

About Luna Foundation Guard

The Luna Foundation Guard (“LFG”) is a nonprofit organization dedicated to creating and delivering greater economic sovereignty, security, and sustainability of open source software and applications that help build and to promote a truly decentralized economy. Through community stewardship, fostering innovation, and supporting research and development of various aspects enveloping open source software and applications, the LFG serves as a vital nexus of resources and guidance for an emerging DeFi technology stack. .

Media Contact

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SOURCE Luna Foundation Guard (LFG)