How A Terra App Allows Users To Buy Ethereum At Big Discount
Terra has evolved into the second biggest blockchain network in crypto behind Ethereum in recent months. On it, there are unique applications, like Kujira, Mirror, and Anchor, that fill the missing gaps in Decentralized Finance (DeFi).
Money Legos of DeFi on Terra
The Terra blockchain and its native stablecoin UST have seen massive demand from users, benefiting from the rise in the popularity of native DeFi applications.
Anchor allows users to save their UST and earn stable yield of around 20%. Mirror enables users to earn yields of around 40~50% through staking synthetic assets and UST together.
Anchor and Mirror triggered a major wave of retail popularity across the Terra ecosystem, bolstering the protocol’s growth.
In recent months, more unique DeFi applications have started to emerge on Terra.
Kujira is a liquidation auction protocol on the Terra blockchain. It basically allows users to bid on liquidated assets on Terra.
Simply put, it means users can buy assets that are liquidated on applications like Anchor at a cheap discount.
This has allowed crypto users to purchase LUNA, Ethereum, and other assets at large discounts when liquidations occur.
Liquidations occur because on DeFi applications, users can borrow money using their crypto assets as collateral.
Usually, borrowers can receive around 70% of their assets as a loan, which they have to pay back over time with interest.
But, if the price of the token they put up as collateral goes down to a certain value, then they risk getting liquidated. In this case, a portion of their funds would be permanently lost.
Kujira enables users to bid on these liquidations, allowing them to buy crypto assets, like LUNA or Ethereum, at a much lower price.
This ultimately can help further stabilize DeFi protocols, especially lending platforms on Terra.
Ryan Park at Anchor said in an interview about Orca, an app within Kujira:
"Lending against collateral is a fundamental component of the Terra eosystem. ORCA adds an additional layer of stability by evenly distributing the proceeds of liquidations amongst a greater majority. Collateral isn’t going into a centralised point but back into the hands of other users. The implications are staggering and quite frankly, I don’t think enough attention has been given to just how big this is.”
Whether it is malfunctioning price oracles or sudden flash crashes, liquidations will always happen across all blockchains.
DeFi apps and protocols that stabilize blockchains from liquidations would continue to be useful in balancing liquidations and lenders in DeFi.
By essentially serving as a marketplace for liquidated assets, Kujira is on track to reach $1.5 million in revenue for LUNA and ETH markets.
“Having been live for 1 month, this puts Kujira's finances well on track for our projected $1.5m in revenue for $bLUNA & $bETH markets alone of which are converted to or kept in $KUJI, and locked in the Lockbox. Looking forward, there will be many other bAssets coming to Anchor, with $bSOL imminent Timer clock As we go cross-chain, our model won't change. Wrapped versions of $KUJI will be market bought using the assets on each respective chain ($DOT, $ETH etc),” the team said.Source