Terra partners with Avalanche to expand UST reserve

Terra announced it was adding AVAX to its LFG reserves, diversifying the fund designed to secure the peg of their stablecoin UST.

Terra announced on Twitter it was teaming up with Avalanche, buying $100 million worth of AVAX to add to the LFG reserves.

Do Kwon, CEO and founder of Terra, told Bloomberg news they picked Avalanche for its “rapid growth and vast fan base”. Drawing a comparison between Avalanche and Ethereum, Do Kwon added that AVAX inspires users’ “loyalty” and “affinity”.

The move diversifies the reserves the Luna Foundation Guard (LFG) has been accumulating to secure their algorithmic stablecoin UST. At the time of writing, the wallet holding the reserves had a balance of over 35,500 BTC, with the goal to accumulate the equivalent of $10 billion. In case the dollar peg fails, the funds, kept by the Luna Foundation Guard, will be used to stabilize UST.

Do Kwon said that Bitcoin will remain the “main backing” of UST. Indeed, Terra’s Twitter statement suggests that the $100 million transaction is but the first step in a larger cooperation, which will also include a $100 million Treasury Swap with TFL.

Over time, it could lead to a better integration between Terra and Avalanche ecosystems, expanding Terra-native DeFi protocols to Avalanche, and a new gaming subnet.