Terraform Labs (TFL) and the Luna Foundation Guard (LFG) have announced that they have purchased a combined $200 million worth of Avalanche Tokens (AVAX) from the Avalanche Foundation.
TFL, the company responsible for the development of the Terra blockchain, exchanged USD 100 million of Terra (LUNA) for AVAX in order to “strategically align the incentives of the ecosystem“, according to Earth’s Twitter.
LFG, a non-profit organization tasked with creating reserves for Terra’s algorithmic stablecoin, TerraUSD (UST), used its own UST holdings to buy another $100 million worth of AVAX from the Avalanche Foundation.
These purchases are intended to bolster the stability of Terra’s native stablecoin, which currently has a market cap of $16.7 billion.
Do Kwon, founder of Terraform Labs, told Bloomberg that LFG selected AVAX for its UST reserves due to the strong growth of the blockchain ecosystem, as well as strong user loyalty.
“Avalanche continues to be a growing ecosystem. Much of it is fueled by loyalty to the AVAX token and users feel a lot of affinity for an asset that aligns with AVAX. […] while for the average Ethereum user, aligning with Ether doesn’t really mean that much.”
As Terra continues to strengthen UST’s position, competitors are looking for new ways to dethrone the stablecoin. Near Protocol, a layer 1 blockchain and competitor to both Ethereum and Terra, is rumored to launch a stablecoin called USN that will reportedly also offer a decentralized finance (DeFi) protocol capable of providing users with 20% Annual Percentage Yield (APY) on your USN deposits.
This is similar to the Anchor protocol of the Terra ecosystem, which currently offers users 1.49% APY on UST deposits.
In a Substack post detailing what he understands of the plans, the founder of the Telegram Crypto Insiders group argued that Near Protocol was superior to both Ethereum and Terra, offering data from Electric Capital outlining Near Protocol’s substantial growth in terms of development.
Kole concluded that the growth of the Near Protocol network, combined with its soon-to-be-launched USN stablecoin and subsequent DeFi protocols, could allow a $11.7 billion market cap to overtake and ultimately eclipse Terra, which has a market cap of of USD 37,200 million.
“This will lead to a comparison of Near to Terra ($LUNA) as the narrative of attractive stablecoin returns proliferates.”
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