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 decentralized finance (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 DeFi, but centralization has mired USDT in years of legal trouble. 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.