Bitcoin x Luna x Stablecoins - How?

There’s been a lot of headlines about this, but haven’t seen a single thing with details about how this would work in practice. All I see is people hyped with something that they can’t really explain, and all just looks like a headline fiesta and no tangible effects.

How does having bitcoin contribute to the stability of the Terra ecosystem?
Doesn’t this just show a lack of belief in the Luna token by TFL/LFG?
How is Bitcoin being acquired?
Is Luna just being traded for BTC?
Isn’t this only going to put downward pressure on Luna? What’s the endgame plan here?

If someone can explain any of this points would be appreciated.

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I believe Do said in twitter spaces that Luna will still be burned when UST is minted however a percentage of this will be used to buy BTC. I don’t know what the exact percentage is but I got the impression that 80% of luna will still be burnt but 20% of the luna will be taken to acquire more btc. Given that BTC is a trustless asset it will be used as “foreign reserves” to back UST as well. Incorporation of BTC would make the UST adoption more attractive and net net would result in Luna appreciating more than the current framework. How this will actually be instituted I’m not sure but the goal is for this to be automated in some fashion through a smart contract, with more integration with the bitcoin netowrk

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Q: How does having bitcoin contribute to the stability of the Terra ecosystem?
A: Having a different source of collateral, with an asset from a different ecosystem removes the potential downward reflexivity event (UST depegs > Ppl sell UST > TFL prints Luna > Luna Price goes down > Ppl keep selling UST > TFL has to print even more Luna since Luna price is down > etc). BTC is considered by many as the hardest decentralised asset. Jump has just proposed a mechanism for redeeming BTC instead of Luna; this actually protects the price of Luna when the ecosystem is under stress / attack.

Q: Doesn’t this just show a lack of belief in the Luna token by TFL/LFG?
A: No, this is an improvement and an extension. In my opinion, it means that UST is not a 100b Market Cap game anymore, but something much bigger. Adding BTC as a collateral helps preparing the infrastructure for the next growth stage of UST (think about a very big number).

Q: How is Bitcoin being acquired?
A: Not much details revealed so far. Current purchases are done via Jump, who sends assets to Coinbase for buying BTC, from what I heard.

Q: Is Luna just being traded for BTC?
A: The proposal is to have, for each UST mkt cap increase, a portion of this increase directed to burn Luna (current mechanism) and also to buy BTC (proportion unknown yet)

Q: Isn’t this only going to put downward pressure on Luna? What’s the endgame plan here?
A: No downward pressure on Luna. A possible ‘endgame’ is:

  • a (very) large market cap for UST
  • the initial 10b of BTC purchased having a market value > the whole UST Market Cap
  • Luna to the moon

Hope this helps
Please do not hesitate to ask for clarification

TFL doesn’t print any luna, you just sell ust for luna on terra market. Anyone can do this process, it’s called arbitration.
BTC is not a part of the terra market assets list, so you can’t trade it directly, so you do have to get rid of some Terra assets to exhange it for BTC (removing value - Market Cap - from the Terra chain and depositing it into the BTC chain)
As far as I can tell BTC purchase is private, LFG and it’s associates control it. So how can this revert back to community?

Thank you for your comments. Let me try to clarify

C: TFL doesn’t print any luna, you just sell ust for luna on terra market. Anyone can do this process, it’s called arbitration.
A: The term ‘printing’ is indeed confusing, it is more like ‘minting’, if you prefer, and the opposite of ‘burning’. It goes via the Market Module; more here: Market — Terra Docs documentation

C: BTC is not a part of the terra market assets list, so you can’t trade it directly, so you do have to get rid of some Terra assets to exhange it for BTC (removing value - Market Cap - from the Terra chain and depositing it into the BTC chain)
A: Yes, BTC needs to be wrapped. Part of the UST value used to burn Luna will be directed toward BTC purchase. A proposal from Jump is currently discussed here: Bitcoin Reserve Pool

C: As far as I can tell BTC purchase is private, LFG and it’s associates control it. So how can this revert back to community?
A: LFG is a separate legal entity. As a Foundation, it is a non-profit. Its mission is described here: LFG - Luna Foundation Guard . I do not think it is part of its mission to give back to the community. Later, there will be BTC owned directly by TFL; but I understand they are different pools, with a different governance.

Hope it helps
Please do not hesitate to ask for clarification