Terra Attracts $150M for DeFi Ecosystem Fund
Terraform Labs, the South Korean company behind the Terra public blockchain, has raised $150 million from a handful of major crypto investors, including Arrington XRP Capital, Pantera Capital, Galaxy Digital and BlockTower Capital.
The $150 million commitment is to Terra’s Ecosystem Fund, which Terraform Labs uses to sponsor projects built on the Terra blockchain.
Terra, which is a Tendermint-based blockchain, deploys a suite of stablecoins based on its dollar-pegged TerraUSD (UST). Terra uses an algorithm to maintain a steady value for UST and its derivatives, incentivizing traders to purchase excess supplies of UST if there’s a drop in value in exchange for Terra’s native governance token LUNA.
UST’s stability has led to a Terra boom, and investors are noticing the stablecoin. Earlier this year, Pantera Capital and Coinbase Ventures contributed to a $25 million funding round to help Terraform Labs build more UST-backed applications, like CHAI, a popular mobile payments dapp with over 2.5 million users in South Korea.
The explosion of DeFi has led to a scramble for a truly decentralized stablecoin that is capable of scaling. Stablecoin projects like Tether’s USDT, the first successful stablecoin and still by far the largest, led to decentralized finance (DeFi), but centralization has mired USDT in years of legal trouble. And according to Terra’s founder and CEO, Do Kwon, other decentralized stablecoins like MakerDAO’s DAI are capital-intensive and have thus struggled with scalability.
TerraUSD, now the fifth-largest stablecoin with a $2 billion market cap, aims to solve the problem. Kwon hopes UST will become the inter-chain stablecoin of choice.
The Ecosystem Fund will be used to develop projects in Terra’s DeFi ecosystem. Most of the projects currently being built on Terra are decentralized protocols and other applications aiming for mainstream adoption using Terra’s stablecoins. Terraform Labs will allocate the funds over the course of two years.
“We’re thrilled to have the continued support of many long-time, early investors in the Terra ecosystem,” Kwon wrote in an email to CoinDesk. “We’re delighted to offer the Ecosystem Fund as an opportunity for builders, entrepreneurs, and our community to supercharge the Terra economy and build something extraordinary.”Source