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Terra founder Do Kwon hinted at a future purchase of $3 billion worth of bitcoin to supply the reserves of the protocol in a recent Twitter Space shared with bitcoin enthusiast Udi Wertheimer. In the same Space, Do Kwon explained the new mechanics that the Terra ecosystem is introducing in order to use bitcoin as collateral for its flagship decentralized stablecoin, UST.
Do Kwon Directs the Terra Ecosystem to Bitcoin
Do Kwon, founder of Terra and Terraform Labs, made some important announcements regarding the future of the Terra ecosystem and its tokens in a Twitter Space hosted by Udi Wertheimer. One of these announcements has to do with the inclusion of new token mechanics that take into consideration some form of bitcoin in the Terra ecosystem. In this regard, Kwon announced Terra is working toward bringing a form of tokenized bitcoin to the Terra blockchain in the most decentralized form possible.
Kwon also explained that with the inclusion of bitcoin, UST would become a hybrid stablecoin, allowing users to exchange $1 worth of UST for $0.99 worth of BTC. This would effectively allow users to redeem BTC by using UST for a premium of 1%, almost in the same way that LUNA is being used right now. Kwon clarified that these mechanics will be explained in the near future in a more detailed way.
When asked about why Terra chose bitcoin as a reserve asset, 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.
Kwon expects this new tokenized version of bitcoin in the Terra ecosystem to become the de facto reserve currency of many protocols built on top of the chain, expanding to be part of every smart contract application that holds any treasury. In light of this, Kwon announced some numbers regarding the amount of bitcoin Terra will purchase in the short term. The Terraform Labs CEO stated the company has a budget to buy $3 billion worth of bitcoin in the short term and announced that most of this bitcoin has not been bought yet.
Do Kwon concluded by announcing that the protocol, through the Luna Foundation Guard, plans to become a regular buyer of bitcoin for the aforementioned purpose.