Recent movements in the treasury of Terra, a decentralized financial payment network, which now burns more than $ 4 billion from LUNA due to a governance proposal, have apparently pushed the price of the asset to record highs. (ATH). . The rise was also accompanied by new proposals to further strengthen the stability of its stablecoin, UST. Do Kwon, director of Terraform Labs, alluded to the inclusion of a bitcoin stash to protect the UST’s dollar peg.
LUNA in full swing
Recent changes in Terra’s issuance model, brought about by the recent Columbus 5 update, appear to have been successful in fostering the growth of the network currency, LUNA. The price of its native asset, LUNA, has risen significantly, hitting ATH levels at $ 69.59 yesterday, recording a price increase of over 50% over the past week. One of the more interesting choices made by the cryptocurrency project was the burning of over $ 4 billion of LUNA that was held in the project’s community pool.
These LUNA tokens have been permanently traded for UST, the project’s sibling stablecoin, and are now waiting to be used for other purposes. This was part of a change in the UST’s emission model.
New hybrid model suggested
So far, there are no other tokens used as collateral to support the value of UST stablecoin. This can, at times, cause the peg to the underlying currency (the US dollar) to be lost for various reasons. Due to model limitations and the incentives to keep the token peg in certain situations, Terraform Labs CEO Do Kwon hinted at introducing other solutions to address this issue.
Make Kwon declared in a recent Twitter thread:
I’m tired of arguing with idiots on Twitter about whether the UST can hold steady at the bear. So I will soon be proposing to create multibillion dollar reserves of decentralized assets (BTC and others) in an attempt to save time.
If that really happened, Terra would become a hybrid project, with a reserve that would support the value of the UST stablecoin in bear markets. Additionally, Kwon alluded to the use of the UST locked in the community pool as insurance for the currency and also to serve as a backing to protect the UST from possible de-anchoring.
Editor’s Note: Since the time of writing, markets have suffered a significant slowdown on December 4, with terra (LUNA) down more than 17% in the past 24 hours.
What do you think of Terra’s recent rise in the market? Tell us in the comments section below.
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