Terra is a public blockchain protocol deploying a suite of algorithmic decentralized stablecoins which underpin a thriving ecosystem that brings DeFi to the masses. Earlier this year Do Kwon, founder and CEO of Terraform Labs, revealed in a tweet the company’s intentions to introduce a stablecoin (UST) backed by bitcoin reserves worth in total of $10 billion. TerraUSD is a decentralized stablecoin running on Ethereum that attempts to maintain a value of US$1.00. Unlike centralized stablecoins, UST isn’t backed by US dollars in a bank account. Instead, in order to mint 1 TerraUSD, US$1.00 worth of TerraUSD’s reserve asset (LUNA) must be burned.
Shortly after Terra went on its buying spree and started accumulating assets. The first three transactions happened in March — two for 1,500 and one for 2,943 BTC. The company continued to amass bitcoin next month. At the beginning of April, it bought $230 million in BTC and so on. Now its bitcoin holdings are over $1.7 billion (42,406.92 BTC) after another purchase of $100 million worth of BTC (Current balance avail here: https://t.co/UNmWPOq7Vh). Over the last several days, bitcoin’s price went on a downtrend. Moreover, it tumbled below $40,000, dropping to its lowest level since March, but the company seems nowhere near concerned regarding the ongoing crypto dip.
Kwon told TechCrunch Terra has purchased $1.6 billion in bitcoin so far and plans to purchase an additional $1.4 billion with capital from Luna Foundation Guard. The Terra protocol will buy the remaining $7 billion of bitcoin through users wanting to mint UST. “Users would put bitcoin into the reserve and then get UST,” he explained.
But what’s more interesting is that these bitcoin purchases can be just the beginning of Kwon and Terra’s larger strategy to expand and integrate the stablecoin deeper into the crypto ecosystem. As Kwon said: “We’re big believers of Bitcoin, so we’re just going to continue to buy whenever there’s an opportunity to.” “Overtime, Terra is going to be backed by a basket of the top Layer 1 assets like Solana and Avalanche.”