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Do Kwon cofounded Terraform Labs to use blockchain technology to develop a more efficient payment system. Its eponymous price-stable cryptocurrency, or stablecoin, attracted 40 million users to work with the company at launch in January 2018. With the aim of building a blockchain-based payment system, Terra has raised $32 million from crypto-giants such as Binance, Arrington XRP and Polychain Capital, as well as assembling an alliance of commerce partners including Korean ticketing giant Ticketmonster and travel service Yanolja.

Why did you choose to focus on stablecoins when launching a blockchain company?

Stablecoins fulfill the currency mandate of cryptocurrencies and are one of the most compelling innovations in the entire industry. They offer significant advantages over fiat currencies derived from their shared infrastructure on blockchains, and are much easier to understand and serve as the basis for building user-friendly, outward-looking applications sourced from DeFi.

The demand for stablecoins on networks like Ethereum is aptly demonstrated by more than $100 billion in circulating stablecoins, as well as the idea that stablecoins are cannibalizing public blockchains as the preferred settlement medium (as opposed to volatile native tokens).

Terra stablecoins (e.g., UST), are fiat-pegged algorithmic stablecoins designed to be censorship-resistant, maintain robust peg assurances, and have a low cost of issuance. This makes Terra stablecoins an ideal inter-chain medium of exchange and value transfer that retains the primary advantages of the underlying blockchain. 

Could you discuss how fiat-pegged stablecoins are collateralized by the network’s native token LUNA?

The Terra Protocol functions somewhat similar to a central bank. However, the policy is replaced by code and community-governed. At a high level, Terra relies on the supply elasticity of LUNA to absorb the price dislocation of stablecoins like UST.

The Terra Protocol is quite simple:

  • When the supply of Terra stablecoins (like UST) goes up, the LUNA supply goes down.
  • When the supply of Terra stablecoins goes down, the LUNA supply goes up.

The Terra protocol acts as a market maker with the on-chain swap mechanism using LUNA to make the market. Like central banks, Terra defends its peg with actions in the open market. But it does so indirectly via arbitrage incentives.

For example, the Terra Protocol always enables on-chain swaps at the target exchange rate baked into the protocol, which is 1 UST for $1 worth of LUNA. Anyone can go to the market (i.e., the on-chain swap mechanism) and swap 1 UST for $1 worth of LUNA and vice versa. The on-chain exchange rate is fixed.

This means that sizeable waves of minting/burning UST (expanding or contracting the outstanding liabilities), induces one of two scenarios:

  • Seigniorage — Minting 1 UST requires burning $1 worth of LUNA — contracting the LUNA supply + expanding the UST supply.
  • Contraction — Redeeming 1 LUNA requires burning 1 UST — contracting the UST supply + expanding the LUNA supply.

Arbitragers take advantage of price dislocations of Terra stablecoin on-chain vs. off-chain venues (like exchanges). For example, if TerraUSD (UST) is trading at a premium on KuCoin, then a trader can mint 1 UST for $1 worth of LUNA on-chain and sell the 1 UST for a profit on Kucoin, concurrently applying downward pressure on the peg to restore its $1 parity when replicated many times and at size by market participants.

Notably, LUNA does not explicitly collateralize the outstanding liabilities (e.g., UST) of the network. Instead, it functions as the “mining power” of the network that absorbs the short-term peg volatility of the stablecoins — meaning that LUNA can “collateralize” the outstanding liabilities of UST on a fractional reserve basis when necessary. The system simply finances Terra stablecoin price-making via LUNA, which is making the price for Terra at a fixed exchange rate based on the oracle price — the on-chain swap mechanism.

You can read more granular details about the protocol here

What is Anchor Protocol precisely and how does it enable Terra stablecoin deposits to earn stable yield?

Anchor Protocol is a decentralized savings protocol and money market built on top of the Terra blockchain. Anchor offers UST depositors a stable 20% APY, which is sourced from the cash flows generated from yield-bearing staking derivatives used as collateral for UST-denominated loans on the borrower side.

Basically, borrowers deposit staking derivatives (or later, other yield-bearing assets) as collateral for loans denominated in UST. The yield from their collateral is passed onto borrowers based on the utilization ratio, where excess yield is drawn into the yield reserve to backstop the 20% APY deposit rate in case borrowing demand falls relative to deposit demand.

Anchor unlocks the potential of bonded staking capital of macro-entangled PoS blockchains, providing the benchmark, cross-chain reference rate for the formation of a DeFi-native interest rate curve.

The Anchor SDK enables projects and applications to easily integrate Anchor’s high-yield savings into their product in only a few lines of code, becoming the “Stripe for Savings” sourced from DeFi. With ETHAnchor, Anchor serves as a cross-chain locus of liquidity for high-yield savings where deposits in multiple stablecoins can capture yields better than the variable rates of most DeFi and centralized incumbents.

More information is available in the Anchor Docs

In 2019, Terra announced a partnership with a payments company called Chai. Could you share the use cases for Chai, its current market adoption rate, and how this partnership works?

CHAI was incubated by Terraform Labs and is now a separate company that relies on Terra stablecoins for its settlement infrastructure. Currently, CHAI has over 2 million+ active users and processes more than $2 billion in yearly transaction volume. With CHAI top-up, users in South Korea don’t even need a bank account anymore.

CHAI recently raised $60 million in a Series B.

In 2020, Terra launched Mirror Protocol, a DeFi protocol that allows for the creation and trading of synthetic assets. Could you elaborate on what Mirror Protocol is specifically and how it enables users to capitalize on the price movement of real world assets?

Mirror Protocol is a synthetic assets protocol built on Terra that enables on-chain exposure to any asset. Users can mint, trade, and provide liquidity for US tech equities, commodities, crypto assets, ETFs, and more all within a single interface.

Mirror is controlled by the community of MIR holders, meaning that the mirrored assets (mAssets) are voted in by the community and parameters registered for trading. mAssets track the price of real-world assets, with incentives designed to help them maintain parity with their underlying asset.

Notably, although mAssets do not provide direct ownership of an asset like a US tech stock, they allow people in financially disenfranchised regions to participate in the wealth creation of global markets by offering them price exposure. Additionally, with Mirror V2 set to launch next week, mAsset composability means that using Anchor UST (aUST) as collateral for minting mAssets enables users to gain price exposure to real world assets while accruing 20% APY from Anchor on top of their position. Composability enables other creative features too, such as minting mAssets with MIR as collateral, building auto-rebalancing ETFs of mAssets, and on-chain asset management platforms built on top of Mirror (e.g., Spar Finance).

Mirror, as opposed to most TradFi exchanges, taps into a global pool of potential users rather than one restricted by geographic barriers due to political issues, onerous fee structures, or other impediments to investing. 

How does Mirror differentiate itself from competing synthetic asset platforms?

Mirror deploys a different collateralization model than its primary competitor on Ethereum — Synthetix. For example, Mirror’s CDP positions for minting mAssets are siloed, meaning that the collateralization ratio can be lower (~150%) for UST deposits to mint mAssets. Additionally, Mirror is inter-chain, with mAssets exported beyond Terra to Ethereum, Binance Smart Chain, and soon to be several other chains. 

What’s next on the agenda for Terraform Labs?

On the near-term horizon, we’re launching our next major mainnet upgrade, Columbus-5, as well as Pylon and Nebula Protocol.

Pylon is a yield-bearing investment gateway, savings, and payments platform built on Anchor Protocol that deploys an innovative “payments-in-cashflow” value exchange model.

Nebula Protocol is an auto-rebalancing ETF protocol for launching and issuing creative ETFs that can contain community-determined allocations to synthetics, crypto assets, and more based on dynamic market conditions.

Beyond that, there are currently dozens of projects building on the Terra network that we’re helping support in any way necessary.

Thank you for the great interview, readers who wish to learn more should visit Terraform Labs.

Naabiae Nenu-B is a Medical Health Student and an SEO Specialist dedicated to flushing the web off fake news and scam scandals. He aims at being "Africa's Best Leak and Review Blogger" and that's the unwavering stand of Xycinews Media.

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Fx Analysis

Investing In Axie Infinity (AXS) – Everything You Need to Know

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Axie Infinity (AXS) is a play-to-earn cryptocurrency ecosystem and gaming network. The platform enables users to earn AXS by playing various games within the Axie Infinity Universe and through user-generated content initiatives. Players can earn rewards by collecting, trading, battling, raising, and mating digital assets called Axies.

Notably, Axie Infinity is extremely popular at this time. The network ranks #1 in terms of daily, weekly, and active users. Notably, Axie Infinity registers 250,000 daily active players. Impressively, the game has generated over 13,000 ETH in revenue. Additionally, the network serves a vital role in providing a fun and educational way to introduce the world to blockchain technology.

Axie Infinity (AXS) - Twitter

Axie Infinity (AXS) – Twitter

What Problems Does Axie Infinity (AXS) Attempt to Fix?

The technical structure of Axie Infinity enables the platform to alleviate many concerns faced by gamers and NFT collectors alike. The network provides users with a viable way to unlock value from the game sphere. In the traditional gaming market, users invest both time and money into digital assets, yet they never really own these items. Axie Infinity shifts the paradigm and puts real ownership back where it belongs – in the hands of gamers.

Benefits of Axie Infinity (AXS)

There are lots of benefits users gain when they participate in the Axie Infinity ecosystem. For one, the blockchain-based trading and battling game is very entertaining. You can spend hours exploring, battling, and collecting valuable NFTs (non-fungible tokens). These tokens range in value based on their scarcity and usability in the game.

Expandable

Another major advantage of the Axie Infinity universe is its open-source nature. The developers behind the concept encourage other community members to create tools to better the overall user experience. In this way, the platform takes a forward-looking stance.

Re-circulating Fee

One of the biggest benefits Axie Infinity users gain is profits. Notably, 95% of its revenue goes back to the players. Specifically, Axie takes a 4.25% fee for buying and selling Axie NFTs. Users also pay a small fee when they breed their Axies.

Axie Stats - Homepage

Axie Stats – Homepage

Passive Rewards

The ROI potential of Axie Infinity has caused the network to operate as a jobs platform for some regions of the world. Users are earning sustainable rewards through gameplay. The Covid-19 pandemic helped drive this income-seeking sector of the market to new heights. Today, there are full-time gamers earning steady ROIs on the network.

How Does Axie Infinity (AXS) Work

Axie Infinity is a Pokémon-inspired universe that combines some popular aspects from games like Cryptokitties and more. Users breed their Axies to develop particular skills and admirable traits. They can then take their specially Axies and complete quests to earn energy.

Axies

Axies are the digital creatures that roam the universe. They can breed and pass down their unique traits. Notably, each Axie can only breed up to seven times before they go sterile. This strategy ensures that there are never too many similar versions of these digital assets in existance.

Battles

Users can battle each other to earn rewards as well. You can breed, raise, and then compete in PVP battles to win leaderboard prizes. These prizes can range from collectible NFTs, prizes, and tokens. The more battle you win, the more valuable your Axie becomes in the ecosystem. Top the leaderboard and your champion Axie will hold value above the competition.

Breeding Axies

One of the core components of the platform is the breeding aspect. This feature is similar to Cryptokitties in that each Axie has a DNA code that holds their individual traits. Users can breed and sell their Axies on the marketplace to secure rewards easily.

Axies - Homepage 2

Axies – Homepage

Collect

Collectors gain a lot of advantages using Axie Infinity. The self-sterilizing features of the market help to improve scarcity. This improved scarcity allows traders to speculate on super-rare Axies. Also, you can easily cash out your Axies using popular DEXs like Uniswap.

Smooth Love Potion (SLP)

Smooth Love Potion (SLP) is an additional crypto used to buy land, farm, or breed Axies in Lunacia. Notably, you must farm love potions to breed Axies. You can also trade this token on a variety of popular DEXs and CEXs such as Uniswap and Binance.

Staking

You don’t have to be a gaming master to secure rewards in the Axie Infinity network. Anyone can claim rewards by staking their AXS tokens. Staking provides a consistent payout and is far less labor-intensive than trading for new users. As such, most new users prefer staking over trading their crypto. Best of all, you retain ownership over your digital assets when you stake.

Axie Infinity Shards (AXS)

AXS is the primary utility and governance token of the network. This ERC-20 governance token can be earned through a variety of tasks. You can earn AXS when you play games or participate in content creation campaigns. AXS is traded on multiple exchanges including SushiSwap and Uniswap.

Community Governance

Axie Infinity incorporates a decentralized governance mechanism. This feature enables AXS token holders to vote on upgrades and more. This system also controls the release of funding from the Community Treasury. In this way, Axie Infinity is partially owned and operated by its users.

History of Axie Infinity (AXS)

Axie Infinity entered the market in 2018. The firm is registered as a for-profit company out of Vietnam. Since its launch, Axie Infinity has seen impressive adoption. The platform features a massive gaming community and an equally large social media presence.

Where to Axie Infinity (AXS)

Binance – Best for Australia, Canada, Singapore, UK, and most of the world. USA residents are prohibited from buying AXS.  Use Discount Code: EE59L0QP for 10% cashback off all trading fees.

Gate.io – Best exchange for USA residents.

Axie Infinity – Bringing Transparency to NFT Gaming

Axie Infinity is a perfect example of how NFT gaming can benefit all parties. Developers see more interactions and profits. At the same time, users gain higher ROI potential with less risk. For these reasons, it’s safe to assume Axie Infinity will remain a pioneering force in the market fr the foreseeable future.

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Fx Analysis

Digital Securities Weekly Market Wrap

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Digital securities remain one of the most promising, yet overlooked, blockchain based sectors.  This past week saw various developments which should continue building upon a strong foundation for the future.

INX Token Listing + Fee Structures

Fresh off the completion of its acquisition of OpenFinance, INX Ltd. is expected to officially list its digital securities on securities trading platform, securities.inx.co.  In doing so, INX Ltd. will become the first company to list a digital security registered through the Securities and Exchange Commission (SEC).

This anticipated listing is only the most recent example of successes by INX Ltd. as the company also went public in mid-2021.

In a further attempt to entice users to its newly launched securities trading platform, beyond the listing of its own digital securities, INX Ltd. has announced that it will be slashing trading fees.

Old Trading Fee New Trading Fee
2.5% 0.2%

Shy Datika, CEO of INX Ltd., commented on each of these developments, stating,

“This listing of our registered digital security, trading on the blockchain, makes history. Blockchain securities are the future, and INX is leading the way. In my opinion, digital security trading fees have been at ridiculously lofty levels in this space. For digital securities to gain true acceptance, they have to be accessible to all, with low fees.”

Yield Funds on Offer by Securitize

Within the digital securities sector, there is perhaps no company busier than Securitize.  Multiple successful funding rounds have given the company the flexibility needed to attain various designations and licensure, while developing a broad suite of services.  This suite is now set to expand further with the company’s announcement that it will be launching multiple yield funds – a feat made possible through co-operation of its various subsidiaries which boast various licensures such as a SEC registered broker/dealer.

These funds, which will be based on Bitcoin and USDC, will boast a 0.5% management fee and be restricted to family offices, institutional and accredited investors.

Carlos Domingo, CEO of Securitize, elaborated on the purpose/benefit behind such funds, stating,

“Securitize’s Bitcoin and USD Coin funds are intended to provide investors with direct exposure to cryptocurrencies, with higher yields and lower fees than other funds currently available on the market. We believe that digital asset securities, also referred to as security tokens, are a fundamentally better way to facilitate and record investments.”

Securitize expects these funds to be particularly appealing due to their regulated nature.  In a time when companies like Binance, BlockFi, etc., are feeling the heat from the SEC and other regulating bodies, offering exposure to digital assets through a more traditional approach seems like a logical move.

Coinbase Pro Lists ‘POLY’

For years Coinbase has remained the standard by which digital asset exchanges are compared, holding true to this day.  As a result, when the platform announces the listing of a new asset, associated markets typically respond favourably due to the increased liquidity and attention afforded to them.  This was most recently on display as Coinbase Pro announced support for Polymath’s native token ‘POLY’ – a company specializing in solutions for the digital securities sector.

Coinbase provides investors with the following description for ‘POLY ‘.

Polymath Network (POLY) is an Ethereum token that aims to facilitate digital securities trading on the Polymath platform. By creating a compliance-focused standard (ST-20) to issue and manage security tokens, Polymath seeks to tokenize and support the trading of traditional and new classes of assets.”

While POLY is currently now available on Coinbase Pro, access through the main Coinbase platform is expected to launch soon.

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Fx Analysis

The Week Ahead in FX (July 26 – 30): USD Braces for FOMC, GDP & Core PCE Index

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It’s gonna be a busy one for the dollar!

Uncle Sam is gearing up for the FOMC statement, advanced GDP release, and core PCE price index.

Don’t forget to review which factors drove forex market price action last week, too!

Major Economic Events:

Australian quarterly CPI (July 28, 1:30 am GMT) – A slightly faster pickup in price pressures is eyed, with the headline CPI slated to advance from 0.5% to 0.6% and the trimmed mean CPI to climb from 0.3% to 0.5% in Q2 2021.

However, this might not do much to lift the Aussie’s spirits, as the economy’s performance is bogged down by another set of lockdowns to curb the spread of the Delta variant.

Canadian CPI (July 28, 12:30 pm GMT) – The Great White North will also be printing its inflation figures midweek, possibly showing mixed results.

The headline reading is projected to have dipped from 0.5% to 0.4% while the common CPI likely ticked higher from 1.8% to 1.9%.

The trimmed CPI probably stayed unchanged at 2.7% while the median CPI might have climbed from 2.4% to 2.5%.

FOMC statement (July 28, 6:00 pm GMT) – No actual interest rate changes are expected from the U.S. central bank, with Fed head Powell still likely to downplay the pickup in inflation.

Still, the pressure is mounting for policymakers to start tapering their asset purchase program since the U.S. economy has been recovering already. Any indication that the Fed is closer to scaling back their stimulus efforts could be bullish for the dollar.

U.S. advanced GDP (July 29, 12:30 pm GMT) – Stronger growth figures are eyed for the previous quarter, with the U.S. economy likely growing by 8.5% in Q2.

Keep in mind that more businesses have reopened in the past few months, likely spurring stronger investment and consumer activity.

An even higher than expected read could reinforce Fed tightening hopes while a downside surprise could cast doubts on seeing tapering moves anytime soon.

U.S. core PCE price index (July 30, 12:30 pm GMT) – Another slight pickup in inflation is eyed, as the reading probably increased from 0.5% to 0.6% for June.

Note that this is the Fed’s preferred inflation measure, so it’s kind of a big deal!

Forex Setup of the Week: AUD/USD

AUD/USD 4-hour Forex Chart
AUD/USD 4-hour Forex Chart

If you’re feeling dollar bullish this week, then this setup could be worth keeping on your radar!

AUD/USD is moving below a descending trend line that seems to be holding as resistance again. Price is moving sideways, suggesting that traders are holding out for catalysts.

A break below the current consolidation above the .7360 area could confirm that the downtrend is resuming, possibly taking AUD/USD to the bearish targets marked by the Fibonacci extension tool.

The 50% level might hold as strong support near the swing low and .7300 major psychological handle. Even stronger bearish momentum could take the pair down to the full extension at .7200.

Technical indicators support the idea of a selloff, as the 100 SMA is safely below the 200 SMA while Stochastic is heading south.

I’d still keep an eye out for all the top-tier economic events in the U.S. and Australia to see if this pair could go further down!

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