Terra has created two cryptocurrencies. One is Designation (CRYPTO: UST), which is a stable currency intentionally pegged to the US dollar. There are other stablecoins that intend to do this, but most of them are backed by the dollar. But with UST, its value is backed by another terra cryptocurrency, Luna (CRYPTO: LUNA)Which makes things interesting.
If the value of the floor tanks decreases in relation to the dollar, then the investors can sell the floor tanks for dollars and make money. But selling the floor tanks burns those tokens, reduces supply and boosts the value of the floor tanks back in line with the dollar. If the value of the floor treasury rises too high, investors can exchange Luna tokens for UST (which are in a one-to-one relationship) and make money this way. But replacing Luna tokens with UST creates new UST tokens, which increase the supply of terrestrial treasuries and bring their value back down in line with the US dollar.
In this video from Motley Fool Backstage PassAnd Registered on December 8thFool analysts Bernd Schmid and Eric Blecker discuss Terra’s unique approach to coin stability. More importantly, guys have noticed that this system works better than other stablecoin projects so far, which means that Terra stands out from its competitors.
Bernd Schmid: That’s what Terra does and she’s really smart, the system she developed. And not only that, it actually works. Other people have developed this before. There were a lot of competitors, but during the sell-off in the crypto channel between May and June, many of them actually crashed. What I just explained aboveAnd So if the demand for floor treasuries increases for the stablecoin, the value of that [inaudible] The currency, the luna in this case the price will go up. The other way it will happen too. So if the demand for the stablecoin drops, the value of the collateral — or the Luna in this case, the unstable currency — will actually go down, and the price will go down. This may cause it to be called a death spiral to the point that if the order collapses too quickly, the whole thing will collapse and then nothing is worth anything anymore. This is actually what has been happening, I think, to almost all algorithmic stablecoins in the last couple of months except for Terra.
The reason is actually because other algorithmic stablecoins have been created there, they used similar financial incentives to what we were talking about before with games just to help people and create demand for these stablecoins, but that was not an official request. Tera is not the case.
In Terra, the first and biggest thing they did was they went to South Korea and integrated into the propulsion system. In fact, this payment system works with the stablecoin on Terra, so merchants who use this, do not pay credit card fees if users pay with it. But you pay a small fee, which is much less than a credit card fee, if they use the system. And this is actually how they created the demand for the stablecoin because it is a much cheaper solution to use Visa or Master Card Credit Card, or other South Korean credit cards. And in fact to this day, 5% of the population of Korea, I think – 2.5 million people – will actually use this. This is a natural demand for this stablecoin, and this is also driving the demand for this Luna token, making it an interesting proposition.
But now, since they had already created this demand, they had now begun to create network effects. That’s what this article is actually about, which I found very interesting. There is a real ecosystem developing on Terra. There are exchanges, where you can exchange tokens of other cryptocurrencies to UST or within each other. Then there is borrowing and lending. I will not go into this. I think this article touches on this, correct me if I’m wrong. You can actually get 20% return on your stablecoin. This sounds crazy. It looks like it’s fake. It sounds like a scam, actually, but it isn’t. If you read it, it is really interesting what they did. It won’t stay at 20%, it’s unsustainable in the sense that it clearly depends on the supply and demand for credit. But now it is, and has been for some time. So it’s fun to use. The protocol is called Anchor. This basically lives on the Terra blockchain. Then they also created another one called Mirror, which I think is the name.
Also this article, if I am not mistaken, go to it. It is where we can buy synthetic stocks. I’m not sure, but, for example, you buy a synthetic Tesla This is backed by Tesla stocks.
This ecosystem is just exploding because it’s not just limited to Terra Labs. They are the founder of the blockchain and the maker of these top three apps I just described. But other third party developers have been jumping on this and some notable developers, also mentioned there, eg Delphi Labs. Delphi is, in my opinion, one of the biggest digital investors, and more focused on institutions. I think they have a hedge fund. They do great research and are very in-depth as well. They also have an investment arm where they provide venture capital, but they also have a technology division, so to speak, where they develop blockchain solutions. They started developing solutions on Terra, and now the ecosystem is exploding. Which means it may be, depending on how well the solutions work and how good they are, also compared to other first layer, for example Ethereum And SolanaWe talked about it before. I imagine it could lead to an influx of new users, and increased demand for floor cabinets.
This is what this article is about. It describes it way better than I just did. But he goes into detail, too. I suggest everyone who is interested to read it. It’s a great project to follow. I think it looks like a lot of interesting things are going to come out there in the next couple of months and years hopefully.
Eric Blaker: Just two things quickly on this. Number 1, let’s pay Fetch.ai Until next week or in the future because I know you have a lot to say about it. I want to ask some questions as well.
Here’s the cool thing about crypto: when you think you’ve seen it all, you start seeing things like synthetic stocks [laughs] Which takes it to a whole new level. I love this quote from you about the use of 5% in Korea. Everyone is looking for comparisons on how something compares to cryptocurrencies, the advent of the World Wide Web, and you start looking at 5% usage. You are definitely beyond early adopters. This is an interesting thing that is already happening.
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