In order to sustain the Terra (Luna) ecosystem and its UST stablecoin, the Luna Foundation Guard began accumulating billions of dollars of Bitcoin to diversify its reserve. The UST stablecoin is algorithmic and can be minted and exchanged for Luna on the Terra network, but since the creation of the Bitcoin reserve, also for BTC and now for AVAX on Avalanche.
The UST stablecoin then becomes native Avax and native Bitcoin in addition to being native Terra.
What’s in it for Terra (Luna), Avalanche (AVAX) and UST?
For a partnership to work, all parties involved must benefit. First, the UST token could see strong growth in its adoption on the Avalanche network (in part still thanks to the Anchor protocol and its tempting interest rate). This also increases its stability, thanks to a diversification of the pool as well as its use.
On the Avalanche side, the UST token mint process requires the burn of AVAX tokens, allowing for a reduction in the amount of tokens in circulation, increasing the rarity of the AVAX token.
Terra should also cover the initial startup costs of some projects that use $UST in the Avax ecosystem to support them and encourage the use of Terra’s stablecoin.
Do Kwon, founder of Terra, also promises to put his hand up to push the growth of the Avalanche ecosystem that he believes in so much. He also calls on Avalanche network projects to engage with the Terra community for joint growth.
A #TERRAVAX thesis:”
An early example of a Terra / Avalanche alliance can be found on the Nebula protocol, which is launching a 5 million UST cash flow and calling on its community, in a governance system, to propose forms of Terra stablecoin use.