Conversation

Mar 23, 2021

I know you're job searching rn, so just letting you know we have internship positions open at Terraform Labs. All jokes aside, happy to answer

@terra_money

's stability mechanism on this thread. Long live the king of algo stablecoins 🌕

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Jsmitty1123

@Jsmitty1123

· Mar 23, 2021

@d0h0k1 it seems that Dan Larimer has concerns about “when” UST starts falling it will “eventually” lead to a hyper inflationary collapse of $LUNA. It seems he doesn’t believe the Terra Ecosystem is sustainable. Do you have a response to the $EOS mastermind?

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Do Kwon

@stablekwon

Mar 23, 2021

1/ For those of you looking in for the first time, here are some resources: White paper: terra.money/Terra_White_pa Primer: medium.com/terra-money/in.

medium.com

Introducing the new Terra Protocol

Over the past few months we’ve been hard at work re-designing the Terra protocol.

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Do Kwon

@stablekwon

Mar 23, 2021

2/ The mechanism is quite simple: When Terra supply goes up, Luna supply goes down. When Terra supply goes down, Luna supply goes up.

Do Kwon

@stablekwon

3/ Just from the above supply dynamics, it can seem that Luna mirrors the cyclicality of Terra's economy. But the protocol has a second stability lever: calibrating fees.

3:44 AM · Mar 23, 2021Twitter Web App

Replying to

4/ The Terra protocol charges a % fee for on-chain transactions. - For Terra<>Luna swap transactions, a 0.5%~ fee is charged - For Terra transactions, a 0.1~1% fee is charged And are paid as block rewards pro-rata to Luna stakers

Do Kwon

@stablekwon

Mar 23, 2021

5/ These fees are adjusted to counter Luna's supply dynamics through changes in market conditions: - Swap fees increase with volume increase in swaps from Terra to Luna - Transaction fees increase quickly as Luna supply increases

Do Kwon

@stablekwon

Mar 23, 2021

6/ In some sense, even if Luna's supply increase, the system increases cashflows to unit staked Luna to make the asset more valuable Luna's economics are designed to be countercyclical to macroeconomic changes in the Terra economy

Do Kwon

@stablekwon

Mar 23, 2021

7/ Furthermore, new apps that have launched recently add further countercyclical levers to the terra economy: - During expansions, investments (

@mirror_protocol

) and yield farming becomes favored, and $UST flows there - During contractions, savings (

) are favored

8/ ... and each new exciting app to launch on the system further diversifies cashflow streams and the robustness of the overall economy.

Do Kwon

@stablekwon

Mar 23, 2021

9/ It is also important to stress that

@terra_money

is the first and the largest algorithmic stablecoin to reach $1B market cap - and has exhibited extreme resilience through many market cycles over the last 2 years.

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10/ The longer

exhibits stability, the stronger the market's conviction grows in the viability of a decentralized medium of exchange & SoV answer to Tether. imo, it is one of the most important projects to be working on in crypto today.

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