Terra buys additional $135M BTC in an attempt to back its UST stablecoin

With additional money raised, Terra's adoption of BTC for its stablecoin reinforces the idea of Bitcoin being a modern, digital, and decentralised gold and Terra has pledged to secure $10 billion worth of Bitcoin in its reserves.
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On March 28, Do Kwon, the Co-Founder of the company behind Terra Blockchain announced the company has added $135 million worth of bitcoin (BTC) for its UST stablecoin reserve, according to multiple media reports.

This brings Terra's total BTC purchase to over $1 billion in 2022. The company has pledged to secure $10 billion worth of Bitcoin in its reserves.

Terra's DeFi (decentralised finance) ecosystem is predominantly centered around its stablecoin. UST is an algorithmic stablecoin, unlike USDT and USDC, which are supposedly backed by USD reserves. Terra employs a smart contract-based mechanism to maintain the price of UST at $1 by burning (permanently destroying) LUNA tokens in order to mint (produce) new UST tokens.

Terra says it is now the leading blockchain in terms of staked value, ahead of Solana, Ethereum, Cardano, Avalanche, and the rest of the altcoins. Stablecoins play an important role in DeFi via staking, liquidity management, and yield generation. Terra's staking platform, Anchor Protocol (ANC-USD), offers a 20 percent annual percentage return (APY) on UST staking on regular bases and Terra blockchain is based on the Cosmos SDK, a platform that allows developers to create their customized blockchains and build decentralised apps on Terra.

In the month of February, The Luna Foundation Guard had secured $1 billion from crypto-focused venture capitalists to bring stability to the stablecoin. With the money raised the company intended to create a Bitcoin reserve for Terra's UST stablecoin. Terra's, LUNA tokens were sold privately to raise the funds.

Currently, the Terra network intends to purchase $10 billion in Bitcoin to serve as a UST reserve. Earlier Do Kwon had claimed that the foundation would buy $3 billion in the near future and the remaining $7 billion at a later date.

Terra's Bitcoin purchase has sparked a lot of debate in the crypto industry. As many experts believe algorithmic stablecoins could be dangerous, and some projects have failed in the crypto market earlier.

But in addition to this, the concept of algorithmic stablecoin has also piqued the interest of other networks. Cardano is the most recent blockchain to make similar announcements.

Edited by Affirunisa Kankudti

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