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Luna Foundation invests $450 million in DeFi protocol

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Luna Foundation Guard (LFG) announced plans to add $450 million to Terra DeFi protocol Anchor’s revenue reserves.

Terra creator Do Kwon’s foundation is helping the DeFi lending protocol maintain its comparatively high 20 percent yield on stablecoin UST for the rest of 2022 — but why is it doing it?

Anchor is at the heart of the Terra DeFi ecosystem as it promises investors a comparatively safe return on their US dollars. At Aave, for example, investors only get 5-10% on deposited stablecoins, while at Anchor they’ve been getting a steady 20% return for over a year. As a result, Anchor has become by far the most important DeFi protocol in the Terra ecosystem and now manages just under UST $10 billion. But the revenue reserves needed to ensure UST’s 20 percent annual return have fallen more than 80 percent in recent months due to a lack of borrowing. The return of 20 percent could not have been guaranteed for much longer and would be up 13-15 percent down.

This is exactly why Luna Foundation Guard has now intervened.

The temporary cash injection of UST 450 million is intended to give Anchor more time to develop a sustainable economic model. At the current pace of development, the cash injection should help the protocol make ends meet for almost nine months.

The DeFi protocol is now planning to expand its service to more blockchains, including Avalanche, Solana, and Atom, to increase its revenue.

In a governance discussion an employee of Hashed, a Terra-affiliated venture capital fund, commented:

We believe that sufficient revenue reserve ensures UST’s growth and benefits all stakeholders. The goal is to ensure that Anchor achieves mass adoption while essentially remaining “decentralized and self-sustaining

Just a few months ago, Crypto.com bought the naming rights to the Lakers Stadium in LA for marketing purposes. Terra is now following suit and has signed a five-year sponsorship deal with the Washington Nationals baseball team.

The first steps towards this agreement began in January. Do Kwon, co-founder of Terraform Labs, the company behind the Terra Blockchain, announced at the time that funds would be raised for a partnership with a yet-to-be-named professional sports franchise.

In line with Kwon’s original proposal, around $40 million will be invested in a deal with the Washington Nationals.

In addition, as part of the agreement with various strategies, the adoption of DeFi on Terra is to be promoted. For example, the two partners plan to make it possible at the baseball team’s exclusive Nationals Park Club to pay with VAT.

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All content in this article is for informational purposes only and in no way serves as investment advice. Investing in cryptocurrencies, commodities and stocks is very risky and can lead to capital losses.

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