March 24, 2022       /       Unchained Daily       /       Laura Shin

Daily Bits ✍️✍️✍️

• Cashio, a stablecoin on Solana, was exploited for $28 million due to a bug that allowed an infinite amount of coins to be minted.

• The EU’s Markets in Crypto Assets (MiCA) legislation could still be delayed if parliamentarians push to re-include a provision restricting proof-of-work mining.

• Luna Foundation Guard intends to increase their reserves to $3 billion worth of BTC.

• A radical proposal to revive MakerDaO, which includes capital-raising elements, roils the community.

• Loopring’s token LRC spiked in price after the beta releaseof GameStop’s NFT marketplace, which is built on Loopring.

Today in Crypto Adoption…

• Loan platform Figure opened a waiting list for crypto-backed mortgages.

• Meta filed trademark applications for its logo in the metaverse. (Disclosure: I write a Bulletin newsletter for Meta.)

• Krafton, a video game publisher, announced a partnership with Solana Labs that could be the first step in integrating NFTs into its flagship game, PlayerUnknown’s Battleground.

• Google searches for Bitcoin and Ethereum are at their lowest levels since December 2020.

• Honduras shut down rumors surrounding an imminent announcement that would make BTC legal tender.

• Thailand banned crypto’s use in payments, but not for trading or investing.

• Florida’s governor has directed state agencies to figure out how to collect tax payments from businesses in crypto.

The $$$ Corner…

• Qualcomm is launching a $100 million fund to invest in the metaverse.

• Acala is spearheading a $250 million fund to support aUSD-focused startups on Polkadot.

What Do You Meme?

What’s Poppin’?

Here’s How Terra Might Deploy Its BTC

Terra’s flagship stablecoin, UST, is undergoing a transformation that will see the algorithmic coin backed partially by bitcoin. (UST is a stablecoin pegged to the US dollar price and currently holds a market capitalization of $15.7 billion (or ~8% of the total stablecoin supply in crypto.)

Luna Foundation Guard is spearheading the push to back UST by bitcoin. As of March 15th, LFG says it has $2.2 billion non-LUNA reserves, along with another 8 million LUNA (or roughly $750 million), that will be used to acquire BTC. According to LFG member and Terraform Labs founder Do Kwon, LFG plans to up its reserves to over $10 billion.

LFG plans to use its ~$3 billion in funds to build a forex reserve denominated in BTC. The reserve is designed to ensure that the price of UST stays pegged to the dollar – especially in extreme market conditions where the price of LUNA, which helps maintain the UST peg via arbitrage, may fail to do so. In essence, if UST depegs from $1, LFG would use its bitcoin reserves to help bring the price of UST back to $1.

By backing UST with bitcoin, LFG hopes to garner industry trust in its stablecoin.

However, just how LFG plans to back UST with bitcoin remained a mystery – until yesterday, when JumpTrading’s crypto arm published a proposal on Terra’s governance forum outlining a “Bitcoin Reserve Pool” that illustrates how LFG will help keep UST’s price pegged to the dollar.

According to the JumpTrading proposal, LFG will place its BTC in a reserve pool governed by the following two rules:

1. During normal trading periods, users can purchase UST with BTC. For example, they could deposit ~$1.00 in BTC for 1 UST.

2. However, in a period of unstable trading, users can provide 1 UST for $0.98 in BTC.

Essentially, the reserve pool gives $3 billion of BTC to sell UST against at a $1:$.98 ratio, even if UST depegs further than $.98. Secondly, the reserve pool offers a place where traders can always trade $1 in BTC for 1 UST – which could be lucrative in the event UST ever depegs over $1.

Setting the ratio of 1 UST for $.98 in BTC forces the reserve pool to only be used during times of extraordinary volatility in UST. For example, according to JumpTrading, “using hourly data in the past ninety days (as of 3/21/22), the 0.1% percentile of UST’s price was just above $0.98” – meaning UST approaches $.98 quite seldomly.

The whole thing works as a virtual AMM for UST and BTC. However, instead of using a normal liquidity pool to power price discovery on the AMM, LFG’s reserve pool will use a data oracle.

While this is just a proposal, the fact that JumpTrading, who was part of LFG’s initial $1 billion fundraising round, published it seems noteworthy. LUNA’s price is up 1.96% in the hours after the proposal was dropped.

Recommended Reads

1. Punk6529 on the safest way to drop NFTs:

2. Split Brick’s Pedro Ojeda on what might happen to LUNA during a death spiral:

3. Goldman Sachs on digitalization:

On The Pod…

The Chopping Block: Do Kwon Pitches a Decentralized NFT Publishing Service

Welcome to The Chopping Block! Crypto insiders Haseeb Qureshi, Tom Schmidt, and Robert Leshner chop it up about the latest news in the digital asset industry. On this week’s episode, Do Kwon, founder of Terraform Labs, also dropped by. Show topics:

• why Do decided to make millions of dollars in bets that LUNA will appreciate in value next year

• what Robert and Do, as crypto/DeFi founders, think about Crypto Twitter

• how the difficulty of building payment systems led to Do launching Terra

• Gauntlet’s recent funding round (and what it does)

• takeaways from Yuga Labs purchasing CryptoPunk and Meebits IP, ApeCoin, Otherside, and more

• how NFTs could change the game publishing and content IP industries

• whether an NFT collection’s cultural relevance is similar to an L1’s TVL

• Bored Ape Yacht Club as the first NFT franchise

• why Haseeb is so disappointed with Axie Infinity, VCs, and other P2E games

• what Facebook’s foray into NFTs might look like

Book Update

You can purchase it here: http://bit.ly/cryptopians