Terraform Labs ‘Gift’ 10M LUNA Tokens to Luna Foundation Guard as Reserve

LFG has about 42,406 Bitcoin tokens in its reserve, the bulk of assets also includes USDT, USDC, and now LUNA.

Terraform Labs, the South Korea-based blockchain startup in charge of the development of the Terra protocol and its associated native coin LUNA has sent 10 million of the tokens worth $880 million to the Luna Foundation Guard (LFG) as a ‘Gift’ per a report from The Block. The Luna Foundation Guard is a not-for-profit organization that is tasked with building the reserve for the protocol’s UST stablecoin.

The $880 million gift donation to the LFG is the latest addition to the UST stablecoin reserve being built by the foundation. The donated funds have eaten a significant share of the LFG reserve which was primarily dominated by Bitcoin (BTC). As a stablecoin, UST pegs its reserves to the United States Dollar through the LUNA tokens. Should the price of UST sway above its dollar peg, some LUNA tokens are burnt to help maintain the peg.

Due to the relatively lower liquidity pool of the LUNA tokens, Do Kwon, the main face behind the Terra Blockchain saw that the current model is unsustainable as any coordinated attempt to redeem UST may lead to what is called a ‘Debt Spiral’ leading to LUNA token’s devaluation. To solve this, the advocacy to switch the reserve to BTC was made and LFG has been accumulating a lot of Bitcoin since the start of the year.

At the moment, LFG has about 42,406 Bitcoin tokens in its reserve, the bulk of assets also includes USDT, USDC, and now LUNA. As shown in data from a Twitter post that tracks the changes in the LFG reserve, the foundation has just about 50,000 LUNA tokens before the transfer. After the funds were sent by Terraform Labs, the LFG moved 7.8 million LUNA tokens to another wallet according to the analytics tracker, Terra Finder.

Diversifying the Luna Foundation Guard Reserve

In boosting the reserve further and fostering the proper functioning of the Luna Foundation Guard, plans have been outlined to purchase an additional $100 million worth of AVAX, the native cryptocurrency of the Avalanche blockchain. This targeted diversification “offers a more robust asset pool to defend against volatility,” according to Terraform Labs head of research in a press release.

The total reserve pool for LFG now sits at $2.43 billion and the short-term plan for the Bitcoin reserve is pegged at $3 billion. The LFG also plans to continually use the fees generated from the protocol to continually acquire the premier digital currency with a projected $10 billion targeted in the long term.

The UST stablecoin is one of the fastest-growing dollar-pegged coins around with a market capitalization of $17.15 billion according to data from CoinMarketCap. The coordinated efforts from both the Terraform Labs and Luna Foundation Guard to grow the stablecoin’s operational functionalities seem to be paying off, and with enough varied assets to back the coin, more stability and growth are bound in the near term.

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Benjamin Godfrey

Benjamin Godfrey is a blockchain enthusiast and journalists who relish writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desires to educate people about cryptocurrencies inspires his contributions to renowned blockchain based media and sites. Benjamin Godfrey is a lover of sports and agriculture.

Source: https://www.coinspeaker.com/terraform-labs-gift-10m-luna-tokens/