The Terra ecosystem development nonprofit Luna Foundation Guard (LFG) announced a burn of 4 million LUNA to mint roughly $372 million in the stablecoin UST for the subsequent purchase of external collateral.
LFG Council has voted to burn another 4M luna to mint roughly 372M ust, which will be used to acquire exogenous collateral. Once this burn is completed, LFG’s non-luna reserves will roughly sit at a value of $2.2B, as well as 8M Luna remaining for future growth.
— LFG | Luna Foundation Guard (@LFG_org) March 15, 2022
The initiative is aimed at further strengthening the 1:1 peg of UST to the USD amid market turbulence. Upon its implementation, LFG’s reserves will total about $2.2 billion, in addition to 8 million LUNA.
Before the collateral was established, the peg of the stablecoin was maintained solely by burning LUNA.
Some skeptics argue that in a bear market the asset’s price could fall, potentially compromising UST’s stability. On March 15, Terraform Labs CEO Do Kwon, made two bets totaling $11 million that this would not happen.
Earlier in March, Terraform Labs transferred $1.2 billion in LUNA to the Luna Foundation Guard to support UST stability. In February, the nonprofit organization raised $1 billion for the same purpose.
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