Luna Foundation Guard (LFG), a Singapore-based nonprofit organization built to support TerraUSD (UST), a stablecoin project that has built up a sizeable reserve of UST tokens, announced Thursday that it is buying $100 million worth of AVAX tokens from the Avalanche network.
The organization made the announcement via Twitter explaining that “Terra will also be further solidified with a $100 million Treasury Swap between TFL [Terraform Labs] and the Avalanche Foundation of $LUNA <> $AVAX to strategically align ecosystem incentives!.”
1/ Thrilled to reveal the blossoming collaboration between @avalancheavax and Terra will also be further solidified with a $100 million Treasury Swap between TFL and the Avalanche Foundation of $LUNA <> $AVAX to strategically align ecosystem incentives!https://t.co/z9A86CWZDs
— Terra (UST) 🌍 Powered by LUNA 🌕 (@terra_money) April 7, 2022
This move further boosts the credibility of Avalanche and its native token AVAX, as a major player in the digital asset space. Additionally, the inclusion of Avalanche in the foundation’s UST reserve is a vote of confidence in the project and its long-term prospects. The move also marks the beginning of a diverse pool of Layer-1 (L1) digital assets supporting the UST peg.
Both Avalanche and Terra are L1 blockchains that aim to provide high scalability and security. They are similar to Ethereum (ETH) in many ways, but also have some unique features. For example, Avalanche uses a new consensus algorithm called “Snowman” that is supposedly more secure and scalable than Ethereum’s soon to be phased out Proof of Work algorithm. In fact, Avalanche achieves finality by having three interconnected blockchains instead of the usual one, making the network one of the most, if not, the most reliable and secure blockchain platform available today.
Terra also uses a new consensus algorithm called “Tendermint” that is claimed to be more energy efficient than Ethereum’s.
In an interview with Bloomberg News, the founder of Terraform Labs (LUNA), Do Kwon, who last month said TerraUSD would be backed by at least $10 billion worth of Bitcoin (BTC), explained that the foundation chose Avalanche over smart contracts network Ethereum due to the former’s impressive growth and vast fan base.
“Avalanche is still a growing ecosystem…a lot of it is fueled by loyalty to the AVAX token and users feel a lot of affinity with an asset that aligns itself with AVAX,” Kwon said. “Whereas for the average Ethereum user, aligning yourself with Ether doesn’t really mean that much.”
Kwon also said that while Bitcoin will remain the “main backing” of UST stablecoin, the deal with Avalanche “buys a lot of user familiarity” for UST and Terra from Avalanche.
AVAX was last changing hands at $87.83, up 3.93% in the last 24 hours. The native token of the Avalanche blockchain has a total market capitalization of $23.5 billion.