Terraform Donates Additional $1.2B to the Luna Foundation Guard
Do Kwon, the CEO of Terraform Labs, announced on Twitter that the funds will be utilized to burn and mint its UST stablecoin in order to grow the reserves of the Luna Foundation Guard.
UST is an algorithmic-based stablecoin in the Terra ecosystem with an exchange rate of 1:1 with the U.S. dollar and is in part maintained by swapping of/for LUNA tokens when its market value deviates from its peg. The burning of $1 in UST results in the minting of $1 in LUNA and vice versa.
The purpose behind the recent move is to maintain the stability of UST and its peg to the U.S. dollar. While other stablecoins manage to maintain this peg using various systems, UST relies on its relationship with LUNA, and the arbitrage opportunities that the treasury offers to traders.
Earlier last month, the Luna Foundation Guard (LFG) raised another $1 billion through its sale of the LUNA token to build a bitcoin-denominated foreign-exchange reserve for UST.
