There has been a pretty high demand for the UST. That has actually led to the pool imbalance on Curve Finance. Hence, special intervention is pretty much required on that front for sure. According to the Best website crypto news, Terraform Labs has made a proper donation to LFG. This Friday, an announcement was made by the founder and CEO of Terraform Labs, Do Kwon.
Terraform Labs is basically one of the best firms to develop blockchain-related ecosystems that actually consist of TerraUSD Stablecoin and Terra Luna. According to the announcement made by Do Kwon, Terraform Labs has made a donation of a total of 1.2 million LUNA. It is currently valued to be at $1.1 Billion. The donation had been made to the LFG or the Luna Foundation Guard.
The launch of LFG took place in the month of January. The main purpose of the Luna Foundation Guard was to ensure that the Terra Ecosystem is able to grow properly. Also, it aimed to improve the sustainability related to the other stablecoins as well.
Kwon has also made a note that all the funds that were denominated related to LUNA will actually be burned to mint UST in order to grow the Reserves of LFG in the best way. “We will keep growing reserves until it becomes mathematically impossible for idiots to claim de-peg risk for UST.”
UST can be described as a proper algorithmic stablecoin. It has a theoretical exchange rate of 1:1 with the US dollar. It can be maintained properly by swapping for/of LUNA tokens when the market value has deviated from the normal range. With the burning of $1 in UST, about $1 in LUNA will be minted and vice-versa.
There is a High Demand for UST in the Crypto Market Resulting in Stablecoin Swapping
But since there is a pretty high demand for the UST in the field of Decentralized Finance or DeFi, there are certain platforms such as Curve Finance that are actually wanting to swap the stablecoins in the first place.
This can result in the creation of a pretty unbalanced pool for the swapping of stablecoins. For example, with the increase in the swapping of USD coins as well as USDT or Tether for UST, the reserves of the pool will start to deplete.
Hence, this could actually lead to price volatility since the supply will lag behind when related to demand. So, all the different types of crypto enthusiasts need to properly understand that the situation is pretty dire and they need to be aware of the seriousness of the situation. Just a few days earlier, TFG took a vote on the burning of about 4.2 million dollars worth of LUNA which was left in the treasury.
This decision of burning the LUNA was made in order to protect the peg of UST. According to TFG: “LFG will swap the LUNA to UST (swap=burn) and sell the UST to the Curve pool. The proceeds will go back to LFG reserves to purchase BTC.”
All can be credited to the flagship Anchor Protocol that was developed by Terra. This protocol is actually one of the main reasons why UST still has so much popularity amongst the different crypto enthusiasts that are in the industry.
UST also makes promises to provide about 20% and more annual yield on the saving deposits of UST for sure. However, according to best website crypto news, a sudden imbalance of the deposits as well as paying interest of lenders, the reserve for the Anchor’s Protocol is on the stage of decline yet. However, it did receive a pretty massive capital infusion and hence there is hope for the future.
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