Thread by @tlagomi

1) Always good to have healthy skepticism, but let’s be reminded of the key distinction between Terra stables and $IRON. Why is it unlikely for $LUNA to get rekt in the same death spiral fashion as $TITAN? 👇

https://twitter.com/bbhodler/status/1417131717299621890

2) Do Kwon said it best. Algo stables have often relied on recursive holding incentives, i.e., the stablecoin’s main use case is to farm more of itself.

https://twitter.com/stablekwon/status/1405742211396882434

3) Terra’s ambition is to build a diversified economy with uncorrelated use cases and revenue streams.

This is why it was absolutely critical that they bootstrapped their user-base with CHAI payments in Korea - still seeing consistent usage and growth

4) These users don’t care nor are aware about what’s going on in the world of DeFi. They’re using Terra stables because they are useful to them

And the fees they pay flow to stakers, establishing a LUNA price floor as a yield-bearing asset. This is entirely uncorrelated to $UST

5) The Terra economy will always self correct as long as this price floor is maintained. If $UST is sold off en-masse during a market downturn, $LUNA will be minted and diluted due to reduced demand.

By design, LUNA stakers are absorbing the volatility of the Terra economy

6) And in the meantime, Terra has become more robust by offering de-peg insurance options while they build out their vision.

Eventually, de-peg insurance won’t be necessary, as the TeFi economy offers more sticky and diversified use cases, further hardening the peg.

https://twitter.com/unslashedf/status/1416107685578219526

7) Ultimately, I agree with @sjpark_TFL - eventually we’ll find that the $LUNA seigniorage model will prove to be highly scalable and stable.

And the reason for this is all the BUIDLERS creating the new TeFi economy, there’s no substitute for true organic growth and utility.

https://twitter.com/sjpark_tfl/status/1415416010346278913