Question on Chai

Hey guys, I was wondering when transaction happens on Chai, at which point it is transferred into Terra stable coin? Or how does the payment system leverage the Terra network?

All of chai’s transactions go through Terra’s chain.
Here is a simplified workflow:

  1. Consumer A connects her bank account with Chai.
  2. She does a purchase using Chai.
  3. Chai creates and manages a wallet for Consumer A.
  4. Chai uses her KRW to purchase KRT on her behalf.
  5. Chai sends her KRT minus the transaction fees to the merchant’s wallet.

Thanks for the answer. So during the process, it actually engages with the bank twice (when user transfers the KRW into KRT) and also when the merchants want to change KRT into KRW. And it happens every time when a transaction happens (not to consider the merchant could accumulate and take out the KRW on a monthly basis). So how does this process improve efficiency?

Also, given an extreme case where all the merchants exchange KRT into KRW (like in a bank run), how could Terra cope with it considering it needs to sell Luna to cover the difference?

The average card fee is in the range of 1.5-2%. Total chai fee (including banking fees + luna fees) for merchants doesn’t exceed 1%. So independently of promotion there are significant efficiency gains from the merchant’s perspective.

Chai has agreed that in exchange of promotions, merchants will have to hold KRT for a fixed period of time if they decide to convert to fiat (the details vary by merchant and cannot be disclosed publicly, but the idea is that chai is willing to offer more aggressive promotions, the longer merchants hold KRT).
This means that future Terra demand from merchants is mostly predictable.

While Luna is the main collateral for terra, TFL is not selling Luna in the open market to defend the peg. The stability mechanism is designed to defend the peg through swaps. If anything it’s worth noting that since genesis more luna have been swapped to KRT, than KRT to Luna.

Finally, chai has signficant working capital that acts as a buffer to unexpected liquidity shocks.

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Thanks for the detailed explanation. I think Chai is a great product and probably the only one that could drive mass adoption in blockchain. I also hold Luna myself :slight_smile:

From what you described tho, at least on a single market level, these features could be achieved by a new entrant in payment space without blockchain too – offering more competitive rates for merchants and offset the fee differences through longer account payment periods?

I understand that having Luna/Terra in the system helps add leverage, but seems like it also doesn’t reflect in the current system yet?

The added benefit of the blockchain is that:

  1. Settlements happen almost instantly at a much lower fee.
  2. As long as either transaction volume or total value locked grows within chai, promotions can be funded via seigniorage. Of course if those conditions are not met seigniorage won’t be distributed.

I saw a tweet claiming transaction fee accrued on Terra is only preceded by Bitcoin and Ethereum. How do I check the volume on Chai and Terra blockchain? How do you check the number of circulating stable coins?

Terra Volume=https://station.terra.money/ (we are in charge of that)

Chai Volume=https://www.chaiscan.com/ (one of our validators created that using the chain data)