In a recent Twitter Space exchanged with bitcoin enthusiast Udi Wertheimer, Terra CEO Do Kwon hinted at a future purchase of $3 billion worth of bitcoin to provide the protocol’s reserves. Do Kwon explained the new mechanics that the Terra ecosystem is implementing to allow for the usage of bitcoin as collateral for its flagship decentralized stablecoin, UST, in the same Space.
Do Kwon Points the Terra Ecosystem in the Direction of Bitcoin
Do Kwon, founder of Terra and Terraform Labs, made several significant disclosures about the Terra ecosystem and its tokens in a Twitter Space moderated by Udi Wertheimer. One of these announcements relates to the integration of new token mechanics in the Terra ecosystem that incorporate some type of bitcoin. In this regard, Kwon stated that Terra is planning to deliver a decentralized type of tokenized bitcoin to the Terra network.
Additionally, Kwon noted that by incorporating bitcoin, UST will become a hybrid stablecoin, allowing users to swap $1 in UST for $0.99 in BTC. This basically allows users to redeem BTC for UST at a 1% premium, similar to how LUNA is now used. Kwon stated that these mechanisms will be explained in greater detail in the near future.
When asked why Terra selected bitcoin as its reserve currency, Kwon stated:
I mean a couple of reasons here, but put simply, bitcoin is the only hard reserve asset that’s been proven out of the digital currencies… It is very difficult for somebody in crypto to question bitcoin.
Explosion of Bitcoin
Kwon anticipates that this new tokenized version of bitcoin in the Terra ecosystem will become the de facto reserve currency for a large number of protocols developed on top of the chain, eventually becoming a component of any smart contract application that manages a treasury. As a result, Kwon revealed certain figures regarding the quantity of bitcoin Terra will purchase in the near future. Terraform Labs’ CEO indicated that the company has a short-term budget of $3 billion to purchase bitcoin and that the majority of this bitcoin has not yet been purchased.
Do Kwon ended by announcing that the protocol intends to become a regular buyer of bitcoin for the aforementioned reason via the Luna Foundation Guard.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.