Terraform Labs Co-founder Do Kwon interprets new progress in Terra ecosystem in NFT, governance proposals and Columbus-5 upgrades.
Written by: Natalie Luu, partner of Lightspeed Venture Partners, investment institution,
compiled by: Perry Wang
Partner of Lightspeed Venture Partners, Natalie Luu, recently interviewed Do Kwon, co-founder of Terraform Labs on Twitter Spaces, and the two sides discussed the latest developments in the Terra ecosystem. Here are some of the highlights.
Image provided by Terraform Labs
Recently I had the opportunity to have a live interview with Do Kwon, co-founder and CEO of Terraform Labs. He is one of the most influential founders in the field of encryption. Before Do and I entered the crypto world, we were college alumni. In 2018, when Do and his co-founder Daniel Shin launched Chai, a payment app that uses Terra stablecoin in South Korea, we were introduced by chance and met again. Do later split off Terraform Labs and focused on building Terra protocols, and Lightspeed was lucky enough to participate in the investment.
This year, Terra's ecosystem has seen explosive growth and is now the fourth largest smart contract platform (source: DeFi Llama), with its total locked-in value (TVL) of nearly $8 billion as of this writing. Terra is a blockchain protocol for "programmable currency" that supports stable programmable payments and the development of open financial infrastructure .
Essentially, Terra is a developer-oriented platform. Developers can build applications on top of the Terra blockchain for countless crypto use cases, including instant payments using stablecoins, trading synthetic assets, generating savings gains from deposits, recurring payments, and NFTs.
Terra has become a global blockchain platform for the intersection of encryption technology and fintech , and Lightspeed is proud to be an investor. At Lightspeed, we invest in fintech and crypto businesses including Affirm, Blockchain.com, Finix, FTX, Offchain Labs, and Wintermute.
interview highlights
Question: Do, can you briefly introduce the mission Terra has to you and briefly introduce LUNA and UST?
Answer: From the perspective of upper-level design, the goal of Terraform Labs is to create the most decentralized and most scalable stablecoin, as a channel to guide mainstream users to adopt cryptocurrencies. Terra's main product is UST, Terra's dollar-anchored stablecoin. UST is balanced by LUNA, the underlying token used for Terra protocol staking and governance. The stablecoins aggregated in
DeFi have exceeded US$125 billion, making it an important part of decentralized applications. Without liquidity and scalable decentralized stablecoins, the DeFi stack will become a meat ticket for custodial stablecoin issuers.
In addition to the Terraform Labs incubation application, dozens of projects in the ecosystem now use UST, which has promoted the growth and growth of the demand side of Terra stablecoin. Other decentralized stablecoins have failed because previous iterations of decentralized stablecoins failed to grasp the importance of stablecoin demand. On the supply side, a robust mechanism is very important, but without a source of demand for stablecoins diversification and stability, it may get out of control when entering a contraction cycle.
Question: This year is an incredible year for the Terra ecosystem, with numerous projects launched and UST achieving expansion across multiple blockchains. What critical moments have led to this rapid development this year?
Answer: Terra's rapid growth this year is the result of development in multiple fields. For example, in 2020, the smart contract feature was enabled and the Mirror synthetic assets and the Anchor savings protocol were released, which became the accelerator of UST's popularization of applications.
Starting with the Mirror protocol, Terraform Labs has incubated several projects that use UST to guide its own growth.After the launch of the Anchor protocol in March 2021, everything started to accelerate at an alarming rate. Soon, dozens of third-party projects were built on Terra, all providing a good use of UST. UST has a market capitalization of over $2 billion and has quickly consolidated its position as the top 5 stablecoins in the market and the largest algorithmic stablecoin.
Since May, more than a hundred projects have announced plans to launch on our network. A few weeks ago, our new mainnet, Columbus-5, went live. Recently, the NFT project has also achieved rapid development on Terra.
Q: UST has recently launched more cryptocurrency/fiat currency portals on several exchanges including Coinbase Pro, Curv and Uniswap. Will there be more channels to buy UST and LUNA in the future?
Answer: The fiat currency aggregator Transak has recently launched UST, allowing users to purchase UST with credit cards. They are payment gateways for cryptocurrencies. Additionally, Terra Station wallet will soon integrate a new way to buy UST, with one project in partnership with Prime Trust, a U.S. asset trust, to swap fiat currency for Terra. If you have downloaded your Terra Station wallet, please stay tuned.
Q: Several Terra NFT projects have attracted strong interest from the community, such as GalacticPunks, which were sold out before they were publicly cast on RandomEarth. Since this is a relatively new project, can you give us some exclusive revelations about Terra's recent NFT projects?
A: In the past few weeks, dozens of NFT projects have been announced on Terra, and we have more projects in the process. NFTs were hardly present on our network before, but with the rapid rise of value narratives of NFTs, NFT projects on Terra cover categories from trading markets to JPEG (Galactic Punks, LUNA Bulls), tools (Random Earth), property ownership , gamified NFT studios (UNOPND), animated story NFTs (Hero), and practical NFTs linked to the real world.
I think today's current NFT forms can be compared to Rolls-Royce - they are usually parked in the garage and only take them out when you want to show off. The vast majority of NFTs today are JPEGs used as personal avatar pictures and may eventually fade. If we can use NFT for various useful applications and use NFT for on-chain authentication, it will be even more promising. For example, loyalty scores can be assigned to users participating in the Terra ecosystem, which are attached to the wallet address according to the participation level. There are many possibilities, but this is one we are currently working on.
Question: What methods does Terraform Labs help the development of Terra native applications?
A: Terraform Labs has transformed from an internal "application factory" incubation protocol (such as Anchor and Mirror) to an "ecosystem enabler". Our role has evolved to provide resources, networking and other tools for third-party projects to drive their success. With so many projects coming soon, we are also exploring other ways to boost the development of the ecosystem, such as bounty programs, education programs and new incentive models for community building. We launched a $150 million Terra Ecosystem Fund and Community Allowance Proposal to help fund new ecosystem projects.
In addition, we have launched some protocols to help other projects in the Terra ecosystem. For example, Pylon Gateway can allow other protocols to distribute locked tokens to the community and provide revenue-generating funds for project milestones controlled by coin holders who provide liquidity. There are also StarTerra (gamified launchpad) and Angel Protocol (sustainable programmable donations).
Q: Can you explain the seigniorage process and talk about how UST supply expansion and demand play a role in LUNA's value capture?
Answer: The Terra protocol runs a bit like open source on-chain banking. Growing demand for UST has brought value increases to LUNA coin holders. The anchoring mechanism is maintained by open market operations of arbitragers and validators who receive mining rewards.
In addition to being used in Terra network, UST can also be used on other networks through cross-chain bridges, including Solana, Ethereum, Harmony and Binance Smart Chain. As more and more applications use UST in these networks, demand for UST is also accelerating, with demand coming from more different sources – further enhancing the robustness of exchange rate anchoring during the shrinkage cycle.
In the Columbus-5 upgrade, 100% of the seigniorage will be destroyed. Similar to Ethereum's gas mechanism update, minting 1 UST on Terra will destroy LUNA worth $1. The fee for this token swap will be paid directly to the stakeholder, and we expect the staked yield to rise to double digits as a result.
We can describe the value capture of the Terra protocol mechanism as follows:
- When the Terra stablecoin supply (such as UST) grows, the LUNA supply decreases.
- When the supply of Terra stablecoin declines, LUNA supply increases.
or another explanation:
- Mint tax ——Minning 1 UST Need to destroy LUNA worth $1 - Reduce LUNA supply + expand UST supply.
- shrinkage — exchange for LUNA worth $1 requires destroying 1 UST — shrinking UST supply + expanding LUNA supply.
As demand for Terra stablecoins grows, LUNA coin holders will benefit from the scarcity of LUNA. The requirements of LUNA are now related to the UST requirements of function .
Source: Murray Rudd. Microeconomic analysis of UST/LUNA price trends and value capture
Question: Which governance proposals do you think will have the greatest impact on Terra in the near future?
A: Terra's IBC (cross-chain communication) proposal will allow Terra to seamlessly port assets and messages to any Cosmos chain, or future IBC-compatible networks. For UST, this means opening the liquidity floodgate of the Cosmos ecosystem, where stablecoins are huge demand, but leading protocols such as Cosmos Gravity DEX and Osmosis do not have stablecoins. We hope UST will be the currency of choice for IBC link chains, so as the inter-chain environment continues to expand, we are very excited about the future development.
Question: As part of the Columbus-5 upgrade, Terra will divert vault funds to the Ozone protection protocol to ensure UST stability. Can you discuss how the Ozone Protection Agreement works?
Answer: The Ozone protection protocol will help protect the Terra ecosystem through a claim-based algorithmic protocol and get rid of DeFi-specific smart contracts and economic risks. Ozone will receive $1 billion from the Terra community funding pool , which will be injected into the ecosystem as capital as insurance claims funds for specific applications and the broader ecosystem foundations such as UST anchorage. Ozone is currently under audit and will release a more detailed protocol launch plan in the coming weeks.
Currently, various insurance providers such as Risk Harbor and Unslashed offer a wide range of insurance varieties targeting the Terra protocol and UST anchors. I'm very interested in what Risk Harbor is doing; in fact, about half of their trading volume actually comes from the Anchor protocol.
Source link: medium.com
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