Terraform Labs, the company behind the Terra blockchain, has launched a non-profit organization that the company likes to call the Luna Foundation Guard (LFG) to support the Terra ecosystem and ensure stability and adoption of its most popular stablecoin, UST. The new non-profit organization will highlight a number of core principles that they see as key to the evolution of the ecosystem, and its creation is also the reason why the Terra LUNA token has been able to minimize losses in the current cryptocurrency bear market.
The newly established fund will serve as a mechanism to further leverage and adopt Terraform Lab’s growing stablecoin, UST. UST adoption continues to grow as the token, generally regarded as one of the most decentralized yet mainstream stablecoin options currently available, approaches a $11 billion market cap.
Terraform Labs founder and CEO Do Kwon will lead the security of the Moon Foundation along with founding member Nicholas Platias and several members of the governing board. The team will allocate foundation grants starting at the end of the month to blockchain projects in the ecosystem that focus on open source development, research and education, and community development on the Terra network.
How is the Terra blockchain absorbing volatility?
The Terra blockchain includes many stablecoins, cryptocurrencies designed to track the price of fiat currencies. For example, TerraUSD tokens are pegged to the price of the US dollar, while TerraEUR tokens are pegged to the price of the euro.All of these stablecoins and more are able to maintain their value thanks to LUNA, a token on the Terra blockchain that is specifically designed to absorb volatility.
Like any asset, the price of each stablecoin fluctuates based on supply and demand. This means that a surge in demand for TerraUSD could push its price above $1.00. To solve this problem, the protocol incentivizes LUNA token holders to convert LUNA to TerraUSD, thereby increasing the supply (and lowering the price) of TerraUSD. This works because a $1 LUNA can always be used to buy one TerraUSD token, even if that token is currently worth $1.01.
And even though the cost of Terra is now at a stable level, many crypto enthusiasts are sure that this will not last long. Yes, now the market has collapsed and most of the crypto assets have lost value, but this fall did not affect the value of Terra. Terra LUNA cryptocurrency has been able to minimize losses in the market over the past few weeks.