Terra, a decentralized payments network, is currently burning more than $4 billion in LUNA due to a governance proposal. These recent moves in its treasury pushed the price of the asset to an all-time high.
This rise was accompanied by new proposals to further strengthen the stability of the stable cryptocurrency UST. Terraform Labs CEO Do Kwon hinted that a Bitcoin reserve was used to maintain the UST's dollar stable.
Recent changes to the Terra issuance model that came with the latest Columbus 5 update seem to have been successful in stimulating the growth of the network's currency, LUNA. The value of the local asset LUNA has increased significantly, hitting ATH levels of $69.59 yesterday.
It also experienced a more than 50% increase in price last week. One of the most interesting decisions taken by the cryptocurrency project was the burning of more than $4 billion in LUNA held in the project's community pool.
So far, no other token has been used as collateral to support the stability of the UST stablecoin. This can cause, at times, the peg to the base currency (US dollar) to break down for various reasons.
Due to the constraints of the model used and in some cases incentives to maintain token pegging, Terraform Labs CEO Do Kwon hinted that other solutions have been launched to address this issue.
Do Kwon said in a recent thread of tweets:
"I'm pretty tired of arguing on Twitter that UST can stay stable in a bear market. So to buy myself some time soon, I'm going to propose creating multi-billion-dollar reserves with decentralized assets (BTC and others)."
If this actually happens, Terra will become a hybrid project with a reserve that will support the value of the UST stablecoin in the bear market.
Further, Kwon implied that the UST, which is locked in the community environment, is used as insurance for the currency and will also act as support to protect the UST from any possible price movement.