Terraform Labs Launches Nonprofit Luna Foundation Guard

Terraform Labs, the company behind the Terra blockchain, has announced today the formation of the Luna Foundation Guard—a non-profit created to foster the growth of the Terra ecosystem.

Terraform Labs Establishes New Ecosystem Organization

The company behind Terra has launched a non-profit organiztion.

Terraform Labs has announced the formation of “LFG,” otherwise known as the Luna Foundation Guard—a non-profit organization established to support the Terra ecosystem and safeguard the stability and adoption of its flagship stablecoin, TerraUSD. 

1/ The first step towards {REDACTED} is now complete.

Introducing the formation of the Luna Foundation Guard (LFG).https://t.co/oqke82OUB2 pic.twitter.com/QKGwrhmtMH

— Terra (UST) ? Powered by LUNA ? (@terra_money) January 20, 2022

Terraform Labs is the founding company behind Terra, the second-largest smart contract blockchain by total value locked behind Ethereum. The company is bootstrapping the LFG with a donation of 50 million LUNA tokens worth over $4 billion at current prices. 

Commenting on the formation of the LFG, Terraform Labs co-founder and CEO Do Kwon said in a press release:

“The LFG mandate to continuously support the peg stability of Terra’s stablecoins and ecosystem development powered by Terra’s best builders offers a new pathway for the growth and sustainability of decentralized money. A decentralized economy needs decentralized money, and LFG provides another nexus of resources to achieve that goal.”

Terra’s flagship product is the algorithmically-governed, seigniorage-style stablecoin TerraUSD. With a supply of roughly 10.8 billion coins, TerraUSD is the fourth-largest stablecoin and the largest decentralized stablecoin by market capitalization in the industry. It’s widely used for decentralized finance activities like lending and borrowing.  

While the price of each coin is pegged to $1, TerraUSD is not backed or collateralized by any traditional or crypto assets. Its price stability is maintained algorithmically in balance with Terra’s native asset, LUNA. Terraform Labs has created and funded the LFG to ensure the long-term sustainability of TerraUSD’s pricing mechanism. 

According to Chronos Finance founder Nicholas Platias, LFG will offer “another lever for closing the demand loop of Terra stablecoins,” and thus provide a more robust peg defense during market volatility.

The LFG will also fund projects advancing decentralized finance and open-source blockchain technology through grants. According to Do Kwon, the LFG will serve as a “counterweight” to Terraform Labs’ participation in the Terra ecosystem and help decentralize the network. 

Terra saw rapid growth in 2021 with LUNA outperforming almost every other major Layer 1 coin. However, Terraform Labs has endured unwelcome attention amid the rise. In September, the SEC served Kwon two subpoenas at Messari’s Mainnet conference. The U.S. regulator’s actions concerned Mirror Protocol, a Terraform Labs product that lets users mint synthetic versions of stocks like Apple and Google. The SEC claimed that such synthetics could technically be classified as securities. In response, Kwon filed a lawsuit challenging the two subpoenas on the grounds that they were “improperly issued” and the public nature of the investigation. The case is ongoing. 

Disclosure: At the time of writing, the author of this feature owned ETH, UST, and several other cryptocurrencies.