$139M Terra Proposal Will "Bring Great UST Use Cases" to DeFi Projects

Terra will provide more than $139 million in UST and LUNA to several major DeFi projects on Ethereum, Solana, and Polygon for at least the next six months.

Decentralized stablecoin issuer Terra has released an ambitious proposal to expand the interchain deployment of its UST stablecoin across five projects on Ethereum, Polygon and Solana.

Terra's Jan. 6 research article, "UST Goes Interchain: Degen Strats Part 3," details how and on which platforms the $139 million of UST and its native stablecoin, LUNA, will be exploited if the proposal passes. .

Terra is a blockchain offering algorithmic stablecoins with a market cap of LUNA ($28.5 billion).

Terra will deposit UST ranging from $250,000 to $50 million in each proposed deployment to increase the stability of each new partner project. The main purpose is to "bring great UST use cases to Ethereum DeFi". Governance participants will hold a vote later to approve the proposal.

Terra founder Do Kwon made it clear in a Dec. 21 tweet that he wants UST to become the dominant stablecoin in the cryptocurrency market. The offering is designed to help Terra accelerate its efforts to grow its market capitalization. Currently only stablecoins BUSD ($14 billion), USDC ($43 billion) and USDT ($78 billion) have a higher market cap than UST ($10.3 billion).

If the proposal passes, Tokemak, a DeFi liquidity provider and market maker on Ethereum, will receive at least 6 months of deposits of $50 million in UST.

Permissionless lending platform Rari Fuse will receive $20 million in UST for 6 months. The funds will be deposited into Fuse’s three pools to help UST become the “cheapest stable borrower” on Fuse.

Convex Finance, a yield aggregator on Ethereum, will receive $18 million for a six-month period. Terra will inject greater LUNA incentives for liquidity providers in several pools using UST across the platform. Convex is one of the largest DeFi yield aggregators with a market cap of $1.9 billion.

Decentralized reserve currency protocol OlympusDAO (OHM) has partnered with Terra and will launch gOHM, the anchored version of OHM, on Terra. Olympus’ proposal includes a commitment of $1.425 million in a $694 million vault, of which $1 million in UST bonds would remain in the vault “in perpetuity” and a $425,000 LUNA reward would last for 3 months.

InvictusDAO (IN) is a fork of OlympusDAO on the Solana network. Terra will expand its presence in Solana by contributing $250,000 of UST to create an IN/UST bond. Frax Finance (FRAX) will match Terra’s bond contribution with $250,000 in FRAX, according to a Jan. 6 AMA.

USDC and USDT, the two largest stablecoins by market cap, are currently the major holders of the project’s $71 million vault. The IN team seemed optimistic about the collaboration with Terra, saying in the AMA:

“Holding UST helps solve the structural treasury problem because we don’t want to increase our holdings of USDC and USDT because of the risk of centralization that comes with it. UST helps to increase the vault and the amount of bonds we can sell.”

A representative of InvictusDAO told Cointelegraph that the proposed partnership would help the Solana ecosystem. “As the chain is dominated by the centralized stablecoin USDC/USDT, I believe the introduction of cross-chain high-quality stablecoins will benefit the ecosystem immensely.”

At the time of writing, the proposal appears to have strong support from governance players on Terra. (Cointelegraph)