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

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 Three,” details how and on which platforms the $139 million in UST and its native stablecoin, LUNA, could be leveraged if the proposal goes through .

Terra is a blockchain offering an algorithmic stablecoin, LUNA market cap ($28.5 billion).

Terra will deposit between $250,000 and $50,000,000 in UST in the deployment of each proposal 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 intended 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 capitalization 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. These funds will be deposited into Fuse’s three pools to help UST become the “cheapest stable loan” on Fuse.

Convex Finance, a yield aggregator on Ethereum, will receive $18 million over a 6-month period. Terra will inject greater LUNA incentives to liquidity providers in several pools using UST on the entire platform. Convex is one of the largest DeFi yield aggregators with a market cap of $1.9 billion.

The decentralized reserve currency protocol OlympusDAO (OHM) has cooperated with Terra and will launch gOHM, the anchor version of OHM, on Terra. Olympus’ proposal includes a commitment of $1.425 million from the $694 million vault, of which $1 million in UST bonds will remain in the vault “permanently” and $425,000 in LUNA rewards 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 in UST to create IN/UST bonds. According to the AMA on January 6th, Frax Finance (FRAX) will match Terra’s bond contribution with $250,000 in FRAX.

USDC and USDT, the two largest stablecoins by market capitalization, are currently the main holders of the project’s $71 million coffers. The IN team seemed optimistic about working with Terra, saying in an AMA:

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

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

At the time of writing, the proposal appears to have strong support from governance participants on Terra.