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The non-profit organization based on the open-source stablecoin network behind Terra USD, Luna Foundation Guard, has closed on a $1 billion increase through the sale of LUNA tokens.
In a Tuesday tweet, Terra said Jump Crypto and Three Arrows Capital led the $1 billion round with participation from DeFiance Capital, Republic Capital, GSR, Tribe Capital, and others. The platform said proceeds of sale—$1 billion—would "go towards establishing a bitcoin-denominated exchange reserve for ust," a stablecoin in the terra ecosystem.
1/ the long-awaited [expurgated] 3 is here!
The Luna Foundation Guard (LFG) has closed a $1 billion private token sale to establish a decentralized $UST Forex Reserve denominated in $BTC!
— Terra (UST) Powered by LUNA (@terra_money) February 22, 2022
“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,” said Terra. 'although the widespread adoption of ust as a stable asset by volatile markets should already refute this claim, a decentralized reserve can offer an additional way to keep the pivot in contractional cycles that reduce the reflexivity of the system."
Terra said it chose to denominate the Forex Reserve in Bitcoin (BTC) because it considered the crypto asset "less correlated to the Terra ecosystem." The platform said that more details on the function and design of the energy reserve will be released in the coming weeks.
The protocol’s website said it utilizes “basic market forces of supply and demand” to maintain a stable price for coins including UST:
"Stablecoins are of no use to users if they maintain their basic price [...] When Terra's demand is strong and supply is limited, Terra's price goes up. When demand for Terra is low and supply is too high, Terra's price falls."
Related: Cointelegraph Consulting: A look at Terra’s ecosystem
Based in Singapore, the Luna Foundation Guard, or LFG, was launched in January to grow the Terra ecosystem and enhance the sustainability of its stabilisers. On Feb. 18, Terraform Labs founder Do Kwon announced the injection of 450 million UST — roughly $450 million — into the Anchor protocol's reserves following a vote by the LFG.
At the time of publication, the price of Terra (LUNA) is $54.03, having risen by more than 1.7% in the last 24 hours. The network hit an all-time high of more than $20 billion in total value locked in December 2021.
