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reserve was funded with 50m LUNA that came from the initial ICO. That’s 5% of the entire LUNA supply. Imo it sets a bad precedent when an algostable chooses to leverage non-renewable liquidity sources to maintain a peg (except for in very early stage bootstrapping).
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And when you take BTC and put it into a multisig wallet and make your protocol depend on it, decentralization goes out the window. You can’t fork LUNA because Terraform Labs and get to choose the winner since they control the BTC multisig in control of the reserve.
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The reason for establishing this reserve could be thought of as a good idea because stability is often psychological and self-reinforcing. If people are worried about the UST peg, it is harder to maintain it because in turbulent times people will try to ”escape to safety”.
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Things that are perceived as having the strongest peg also see much less stress testing of their peg. That’s why a 3B safety net can yield much more than 3B in cost savings, because of the psychological impact that leads to way less stress tests in perpetuity.
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But, using these kind of one-off solutions to build a reserve is a huge miss because it still undermines the belief in the system’s sustainability if you leverage ICO funds to build it. It inspires much greater confidence if you sustainably built a reserve from protocol fees.
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TL;DR is centralized and funded by ICO money which is inherently unsustainable, violating the two most important tenets of a decentralized algostable.
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I didn’t see clarifying anywhere that the reserve was built using ICO money, and he gets super defensive if you want to write a thread about where the money came from that’s longer than a tweet.
Quote Tweet
Replying to @ercwl and @adam3us
Did you replace my explanation with a literal stream of consciousness and call it better?
Useless iwo
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Hey Eric, couple of clarifications:
First, the reserve is not funded through an initial coin offering, unless you mean the luna we are holding is an “ICO”
Terra only raised 32M or so from funds before network launch, and don’t think this money made a meaningful contribution
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Second, I am not sure you know where the right places to look for content in the Terra community, but tweet replies to adam beck is not usually where you can get the best information - hope you agree.
Thesse are better
flipsidecrypto.xyz/terra/lfg
flipsidecrypto.xyz/terra/lfg-netw
Third, while the reserve is bootstrapped from our donation, bitcoin will be purchased through ongoing usage of Terra seigniorage - the notes for this is in Terra’s main research forum, agora:
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These are the wallet addresses currently being held by the reserve:
BTC: bc1q9d4ywgfnd8h43da5tpcxcn6ajv590cg6d3tg6axemvljvt2k76zs50tv4q
ERC-20: receiving address: 0xAd41BD1cf3Fd753017Ef5c0da8dF31A3074EA1Ea
Terra: terra1gr0xesnseevzt3h4nxr64sh5gk4dwrwgszx3nw
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