Proposal: TerraBTC

I searched the site, and couldn’t find any discussion on this. So the proposal is to use the terra stablecoin mechanics to create a BTC pegged TerraBTC “stablecoin”. Stable in the sense that it is 1-1 pegged to BTC. Why do this?

  • It enables same benefits on Terra that WBTC enables on Ethereum, and without custody
  • Using TerraBTC as collateral on Mirror, without having to create a CDP. mBTC-UST LP has fairly low liquidity
  • Writing smart contracts involving BTC, albeit through a peg

BTC is emerging as a new world currency, and I think it should be treated as a first-class citizen in the Terra network.

Edit 1:

  • TerraBTC would allow BTC denominated savings/loans in Anchor. I think that would garner a lot of interest for Anchor + Terra.

Makes sense. I see why not

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20% apy on TerraBTC would be special.

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If BTC outperformed LUNA over the long run does this pose any risk to the system? Could it create a situation where there isn’t enough collateral in the form of LUNA? With the fiat pairs this isn’t a problem for obvious reasons :slight_smile:

Mean-reverting and inflationary synthetic assets with constant demand makes LUNA increasingly valuable. On the other hand, assets that are expected to increase in value long term makes LUNA less valuable with constant demand. For those assets to contribute to the value of LUNA, the demand must be higher than the price appreciation.

It would be risky to add an assets such as BTC since it could put enormous downwards pressure on LUNA in a situation where TerraBTC market cap goes to the moon and a whale decides to sell a significant amount of TerraBTC. This could lead to a downwards spiral which would weaken the confidence in LUNA as collateral for the synths.

It’s also a slippery slope to other tokens. Will ETH be next? Why not BNB? At some point it will become impossible to sustain positive LUNA price appreciation when the market cap of assets with exponential growth outgrows the demand for the corresponding synths.

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Excuse my noobishness, but if buying TerraBTC necessitates first swapping BTC into UST (presuming the trader is changing BTC into TerraBTC) then that should increase UST buy pressure and Luna value, no?

I was thinking exactly the same. What’s the purpose of Mirror if all assets can be minted with better capital efficiency and liquidity, the same way Terra stablecoins are minted? It works for Synthetix on Ethereum…

But it turns out that it leads to less desirable supply/demand mechanics for Luna (in terms of $). Assume 5k people buys TerraBTC yearly, and 2k people sells their TerraBTC holdings (net +3k holders). If the value of BTC increases by 200%, it would strangely lead to a net mint of Luna (increasing both TerraBTC and Luna supply).

If demand for TerraBTC grows exponentially, it’s not a problem, but if demand is constant (in terms of $) while price appreciation is exponential, it would eventually lead to a growing supply of Luna.


What about doing something like Gold? This seems less risky… Offering an interest rate denominated in Gold would be pretty cool as well! People could build their own gold denominated applications across the board by just leveraging existing code :slight_smile:

Basically I just really worry about exposing the core mechanism to the Bitcoin boom and bust cycle. In the past Do has talked about building diversified and stable demand for the currencies to keep LUNA resilient. This makes a lot of sense. Bitcoin demand will be super erratic and hard to control / predict.


TerraXAU and TerraXAG could also be interesting. They are stable and traditional hedges for fiat currencies. And like TerraBTC one could ask if this is a slippery slope, ie. is copper, platinum next and where do we stop? But that same discussion must be had anyway with currencies from small countries.

But if this does put risks on LUNA, then maybe this is indeed the wrong place to do it. Focusing on making mAssets better incentivized and composable with other services, like Anchor, could be the better way to go.

The problem with mBTC is that you effectively can’t mint it as a long position. Maybe someone here has some ideas on how this could be achieved.


There seems to be a somewhat related discussion on Synthetix:

The proposal aims to provide an uncollateralized sETH by locking ETH/WETH.

Estoy de acuerdo…seria lo mejor un LUNA-GOLD

Make sense. I revert my previous opinion, wise senpai

TerraBTC is not a great idea.