Terra buys $200M in AVAX for reserves as rival stablecoins emerge
Terraform Labs (TFL) and the Luna Foundation Guard (LFG) have announced they have purchased a combined $200 million worth of AVAX tokens from the Avalanche Foundation.
TFL, the company responsible for the development of the Terra blockchain, swapped $100 million worth of Terra’s native token, LUNA for AVAX tokens, in order to “strategically align ecosystem incentives”, according to Terra’s twitter.
LFG, a non-profit organization mandated to build reserves for Terra’s algorithmic stablecoin UST, used its own holdings of UST to purchase an additional $100 million worth of AVAX from the Avalanche Foundation.
These purchases are meant to reinforce the stability of Terra’s native UST stablecoin, which currently has a market cap of $16.7 billion.
Do Kwon, the founder of Terraform Labs, told Bloomberg that LFG selected AVAX for its UST reserves because of solid growth in the blockchain’s ecosystem as well as the stark loyalty of its users.
As Terra continues to strengthen the position of UST, competitors are looking for new ways to dethrone the stablecoin. Near Protocol (NEAR), a Layer-1 blockchain and competitor to both Ethereum and Terra, is rumored to be releasing a stablecoin called USN, which will reportedly also offer a decentralized finance protocol capable of providing users with a 20% annual percentage yield (APY) on their USN deposits.
This is similar to the Terra ecosystem’s Anchor protocol which currently offers users a 19.49% APY on UST deposits.
In a Substack post detailing what he understands of the plans, Crypto Insiders Telegram group founder Zoran Kole argued that Near protocol was superior to both Etheruem and Terra, offering data from Electric Capital that outlined Near Protocol’s substantial growth in terms
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