Stablecoin issuer, Terra (LUNA) is going ahead with its plans to purchase a massive trove of Bitcoin (BTC) reserves, according to its Founder and CEO in a tweet a few days ago.
Do Kwon, Terra founder revealed that the stablecoin issuer is on the cusp of purchasing $3 billion worth of Bitcoin, following his announcement that Terra’s major plan is to accumulate $10 billion in BTC.
Kwon tweeted, “It’s not $10 billion today – as UST money supply grows a portion of the seigniorage will go to build BTC reserves bridged to the Terra chai. We have $3 billion funds ready to seed this reserve, but technical infrastructure (bridges etc) is still not ready yet.”
Kwon also told Udi Wertheimer in an interview that it’s safer to establish reserves in Bitcoin (BTC), the largest cryptocurrency by market capitalization, than any other crypto asset. According to the CEO, Bitcoin will backstop short-term UST redemptions.
Do Kwon noted:
“It’s the only asset with a provably calcified and hard code base and much better distributed than all the other digital assets. So it makes sense to think about using Bitcoin as a hard currency…
“The basic schema is very simple. We’re exploring a number of different bridges to be able to move Bitcoin into Terra in a trustless, nonwrapped fashion. And let’s assume that Bitcoin is available in tokenized form on Terra, with the mechanics thereof still being researched.
“In that case, what we would do is we would put it into a smart contract whereby people can trade in UST to get roughly a dollar’s worth of Bitcoin. So let’s say minus 1% off or minus 2% off, and people can mint UST by trading in Bitcoin against the reserve at par value.
“So at any given time, you can trade in a dollar’s worth of tokenized Bitcoin on Terra and then get one UST, and then you can trade in one UST for slightly less than a dollars’ worth of Bitcoin.”