Our Investment in Terra: Re-building Money from The Ground Up
Ever since the start of Hashed, stablecoin has been one of the major areas of focus. Living in Korea where financial and payment systems are highly regulated with horrendously out-dated centralized infrastructure, it was natural to think about what the decoupling of governments and money would mean to our economy. While Bitcoin and other cryptocurrencies provided appealing features such as no government control, international remittance without interference, and easy storage of assets than physical money, lack of price stability prevented them from displacing most forms of fiat money. As much as a fiat-free, fully decentralized stablecoin sounds like a fairy tale, a successful implementation could be a major catalyst for fundamental long-term changes in the global economy and will open up opportunities for decentralized applications to directly impact our lives.
From day 1, the Terra team was envisioning beyond creating just a widely accepted stablecoin.
We met with Dan and Do in Seoul during the initial formation of the Terra team in 2017. The market was rallying towards the peak, stablecoin market share was dominated by fiat backed stablecoins (still today) and the concept of fully decentralized stablecoin that is not fiat dependent was still alien.
Dan, with extensive experience in building one of the biggest e-commerce platforms in Asia, laid out the existing problems we face in payment networks that cannot be solved through just incremental improvements. Do, previously a founder of a wireless mesh network startup building decentralized application, explained how Terra can turn those problems into an opportunity to build money from the ground up.
We were immediately impressed with the sophistication of their mechanical design and execution speed. As Dan expanded on their go-to-market to capture long-term demand, it quickly became clear how important Terra would be for the mass adoption of cryptocurrency.
Interestingly, almost no one in crypto talks about real-world integration of stablecoins in services we use daily. This is particularly curious because the stablecoin space has gotten very saturated. Yet, the main function they serve is limited to traders moving money or taking leverage between exchanges quickly — without having to rely on access to traditional banking.
Why are there basically no solutions directly aimed at providing usable stablecoin in standard businesses? We can identify two reasons: either it does not need to be decentralized or it’s just such a hard problem that many developments are back-end focused, not use cases. We suspect the answer is a little bit of both. Regardless, we believe having a strong commercial application is crucial for blockchain projects to thrive for the long-term.
They’ve done a superb job executing: building product, hiring, facilitating and interacting with the community, and more. Since our initial conversation, co-founders Dan, Do, and the rest of the Terra team have been heads down, building (its mobile payments app will be launching in Q2 2019!) a world-class fintech platform. Big wins in adoption as well, integrating into fastest growing e-commerce players in the world totaling $25B in GMV and getting recognized by Mongolian government as a solutions provider and enabler in their quest for digitizing Ulaanbaatar’s financial industry landscape. While many of the stablecoin projects are capped on their scalability by the broad crypto market, Terra is making all the right steps to set itself apart through mass adoption.
Do understands that sustainable demand does not just come from integration into payments. With clear governance and responsibility of its participants, Terra has created a decentralized stablecoin that reflects the universal features of the current fiat monetary systems. Terra reinvests economic growth to provide ongoing discounts to consumers, incentivizing smart consumers to choose its payment system and stay. Luna, its stability engine, is a simple yet ingenious way to tightly align holders’ incentive to participate and contribute to the growth of the Terra network. This creates a virtuous positive feedback loop for Terra demand, where growth begets seigniorage and discounts beget further adoption.
We are excited to continue to work with Terra leadership to realize their vision. We believe Terra will go beyond being a widely accepted digital currency and evolve into an open platform where innovative financial dApps can build upon its stability and offer a competitive value proposition to their end users. Terra team has already been working closely with our portfolio companies to help bridge the gap between the yet-to-be-realized potential of blockchain and real-world applications.
The problems the Terra team are solving are immense and foundational to the future of money. We look forward to seeing all of the amazing ecosystems that will be built on Terra.
Written by Baek Kyoum Kim
