The Luna Foundation Guard, a new decentralized organization created to support the Luna ecosystem, was launched in Singapore in Jan 17 2022. The institution will provide grants to support initiatives built on top of the Luna network. One of its primary functions will be to create a “forex reserve” that will assist UST, the Luna ecosystem’s companion stablecoin, in maintaining its peg.

The Luna Foundation Guard has been launched to support the Terra Ecosystem.

The Luna Foundation Guard, a non-profit organization, has been established to assist in the support and maintenance of the Terra ecosystem as a decentralized counterparty to Terraform Labs, the company behind the UST currency. This organization will have several functions, including ecosystem promotion and direct funding of various programs through grants, which will be distributed through its website beginning January 31.

Do Kwon, co-founder of Terraform Labs, announced the new initiative on Twitter, informing followers that the company had donated 50 million LUNA, valued at $4 billion, to the initiative. Do Kwon, Nicholas Platias, Kanav Kariya, Remi Tetot, Jonathan Caras, Jose Maria Delgado, and Bill Chin will serve as founders and leaders of the organization, which will be based in Singapore.

The Main Goal of UST Stability

The foundation will also work to keep the UST stablecoin pegged to the US dollar. In this regard, Kwon stated on social media that it will strive for:

First, building a decentralized forex reserve against which $UST can be redeemed during currency contractions. It will work towards reserves to operate decentralized and onchain.

UST, unlike similar stablecoins whose value is collateralized, operates by maintaining a balance between two assets in the Terra ecosystem. This could have an impact on the currency’s peg to the dollar if there aren’t enough incentives in the market to profit from the arbitrage of UST and Luna. The formation of this organization aims to prevent such a situation from occurring.

The UST stablecoin has grown enormously in tandem with LUNA, the Terra ecosystem’s native asset, which is now the ninth largest cryptocurrency by market capitalization. Similarly, UST has surpassed a market capitalization of more than $11 billion, surpassing DAI, its Ethereum-based counterpart, as the market’s most valuable decentralized stablecoin project.