Fast-growing Terra DeFi Built in toolkit universeIs currently officially the second largest ecosystem in decentralized finance.
According to the data extracted from DeFi llamaTerra currently boasts a total value lock (TVL) of just over $ 23 billion, a record high on a US dollar basis.
This is about twice that of the runner-up BNB chain (Previously Binance Smart Chain) And Fantom. King chain, EthereumStill dominates 54% The entire DeFi marketOrder $ 111 billion.
However, if you switch the chart to a LUNA-represented TVL, the Terra Network’s native tokens will be used to pay transaction fees and vote for governance. The situation is a little different.
Instead, the recent surge looks like a minor blip compared to last summer’s activity.
This shows that LUNA’s mooning price is the main driving force of the network, along with the rise in actual activity (people pouring crypto into the network to do fun DeFi).
CoinGecko shows that LUNA has risen by nearly 38.8% in the past week. Over the same period, the native tokens behind Terra’s largest DeFi project, the Anchor Protocol (ANC), also surged by more than 70%.Anchor is a money market similar to Ethereum AaveUsers can earn up to 19.49% on UST (Terra algorithm, US dollar pegs) Stablecoin).
Therefore, there are many price actions that give a significant boost to the Terra ecosystem. There are countless reasons for the latest boosts.For example, the LUNA token I just started trading At FTX Exchange last month.
But more important was the protocol Allocate $ 1 billion Bitcoin treasury generated through the sale of LUNA tokens. Jump cipher And Three Arrows Capital led the procurement on February 23, and it is reported that the funds were used to establish what is called “UST foreign exchange reserves”.
The idea is to allow Stablecoin to provide uncorrelated reserves in case prices fluctuate, as the Luna Foundation Guard (LFG), a non-profit organization designed to support all of Terra. Is to do. This helps to lock the UST to $ 1.
Given the design of UST and LUNA, the fact that this spare is in an uncorrelated spare is important. Every time $ 1 of UST is created, $ 1 of LUNA is discarded. The reverse is also true. Every time a LUNA is created, the UST is destroyed.
This creates an interesting arbitrage opportunity. Even if the UST is below $ 1, the user can buy the UST and exchange it for $ 1 of LUNA to get the discount in their pocket. And if you buy and replace this UST, it will burn and be removed from the circulation. This will help reduce the supply of stablecoin and bring the price back to $ 1.
Conversely, if more LUNA is destroyed to mint UST, the cyclic supply of LUNA will decrease, resulting in a similar price increase for tokens.
As you can see, this is a very tight supply-demand relationship between these two assets.By introducing irrelevant assets such as Bitcoin In the equation, LFG is preparing itself in case the above mechanism cannot maintain the UST pegs for some reason.
And as UST’s market capitalization grows weekly, the $ 1 billion figure makes a lot of sense. A huge reserve is needed to stabilize a project with a market capitalization of more than $ 13 billion.
Another advantage of using Bitcoin as a reserve asset in the Terra ecosystem is, for example, that Bitcoin is censored and decentralized. USDC Stablecoin that supports the algorithm stablecoin DAI..
This is a unique move from a unique project. But in the end, the market never knows until Terra and its stablecoin are truly tested through some sort of Black Swan event. Happened in March 2020..
So far, so-called Lunatics are still obsessed with the LUNA and DeFi projects under its umbrella.
And while it’s still a long way to catch Ethereum, the fact that it’s pulled away from the rest of the pack suggests that Terra is more than a pan flush.
https://decrypt.co/94370/terra-defis-network-choice-ethereum
Top 5 crypto news articles and features in your inbox every day.
Get the daily digest for the best decryption. News, original features, etc.
