Stable coin adoption accelerates with new foundation

With a market cap of more than $170 billion, stable coin adoption is exploding. The total market for stable coins increased by 450 percent in 2021 alone. Stable coin is a viable internet-native medium of exchange between public ledgers, and act as the base layer and collateral for the DeFi space.

The dominant stable coin on the market today,USDT andUSDC, are digital tokens pegged 1: 1 to the U.S. dollar by maintaining a reserve backing in the form of cash or cash equivalents. The true nature of the reserve is still subject to debate, as it is issued by Tether.

There is an issue regarding the dollar-pegged stable coin, which is centralized to the issuers and users are subject to issuers terms of use. Three Ethereum addresses holding $150 million in USDT were froze last week by Tether. It is not an ideal situation from a decentralization or permissionlessness standpoint, regardless of the justification in individual cases.

There are a number of projects that are developing stable coin to address the centralization challenge. TerraUSD UST, developed by Terraform Labs, is now the leading stable coin in the market and 4th overall behindUSDT, USDC, and BUSD, with a current outstanding market cap of nearly 11 billion rank 16 by market cap. The second stable coin, DAI, is number 30 with a $9.3 billion market cap.

The newly announced Luna Foundation Group LFG will initially be funded with a 50 million LUNA $3,97 billion grant from Terraform Labs to bootstrap its stabilizing reserves and grants framework to support and stabilize UST s peg to the U.S. dollar.

The planned execution from the Terraform Labs wallet is scheduled for the 22nd of January. The transaction will be shared publicly once complete for transparency, according to the blog post announcement.

The core mission of LFG is to buttress the stability of the UST peg and foster the growth of the Terra system, as per the blog post by Terraform labs. Building reserves that back up the peg of algorithmic stable coins and directing resources into research that further advances what is possible with stable coin is just the beginning. Grants will be awarded to builders, researchers, community members, and anyone else who are pursuing bold ideas in the interest of the Terra economy. A non-profit organization is a new pathway for the development of a decentralized economy built on truly decentralized money. LFG will be run by a governing council, consisting of leaders and experts in the industry. The Council will consist of Do Kwon, co-founder and CEO of Terraform Labs, Nicholas Platias, founding member of Terraform Labs, Kanav Kariya, president of JumpCrypto, Remi Tetot, Jonathan Caras, project lead at Levana Protocol, Jose Maria Delgado, co-founder of Delphi Digital and Bill Chin, head of Binance Labs Fund.

Grants to developers and support for the peg are provided by the grants.

The official Twitter account of Terraform Labs stated that LFG is a non-profit organization that is mandated to build reserves supporting the UST peg amid volatile market conditions and allocate resources to support the growth and development of the Terra ecosystem. LFG's initial goals include promoting the technology, establishing educational programs, allocating grants funding product development, and providing transparency to online communities about ongoing activities and projects. As UST grew to become the largest decentralization money in criptocurrency, two questions that popped up most frequently were: Is UST sufficiently collateralized, and is the Terra network sufficiently decentralized? LFG is a good start to answer both of these questions. Do Kwon also comments about the large donation of nearly four billion dollars from Terraform Labs to LFG to bootstrap the foundation, and the purpose of the funds.

Terraform Labs is giving $50 million luna to LFG to focus on the stability and adoption of UST, and to strengthen its place as the undisputed leader in decentralized money across allBlockchains. LFG will be doing two things, first of all, building a decentralized forex reserve against which UST can be redeemed during currency contractions. It will work towards reserves to operate on a chain. LFG will be funding public goods projects through grants, and will be a counterweight to Terraform Labs in the Terra ecosystem, Kwon tweets.