Hello, everyone! Over two weeks, there were a lot of events. First of all, in the interest of increasing short term block rewards to offset validation costs and improve the cybersecurity of the network, the signatory validators to this proposal agreed to a solution called Project Santa. Project Santa is a bot that distributes Terra foundation tokens to network stakeholders in order to subsidize block rewards. To kickstart the process, the Terraform Labs validators agreed to seed Project Santa with 21.6 million Luna tokens to be distributed over the next year. This results in approximately a 10% staking yield on the 216 million tokens currently staked. Validators are welcome. Also starting from 12 August 2019 stablecoin TerraSDT (SDT) and Terra’s mining token Luna (LUNA) — will make their debut on the Bitrue exchange. A key step creating a robust Terra/Luna on-chain market is finding the right algorithm, and you can learn more what the Terra team is exploring for the next iteration of mainnet Columbus. Finally, The Terra Stablecoin Is Partnering With a South Korean Fashion Market. You can read more about these updates in our post. Stay tuned!
Social encounters
The goal of Terra, a South Korea-based stablecoin project aimed at mass adoption, is to become the largest payments network in Asia in the next three years, Daniel Shin, co-founder of Terra, told Cryptonews.com.
To accomplish its goal, Terra, which is backed by South Korea’s internet giant Kakao among others, is focused on integrating with new e-commerce partners, thus growing their transaction volume. Through the mainstream platforms with millions of users, Terra plans to gain mainstream users as well, that way enabling widespread adoption of Terra’s blockchain technology.
“The ‘build something great and users will come’ attitude hasn’t served the blockchain industry well,” Shin said, but “recent user numbers show that Terra’s go-to-market strategy works”. As they find that blockchain technology needs to be useful and used, Terra decided to have an e-commerce alliance from the very beginning, which currently includes 25 partners across 10 countries, with a collective annual transaction volume of USD 25 billion and 45 million users. All partners agreed to integrate Terra’s blockchain-based payments solution. It is already available on e-commerce platform founded by Shin called TMON and on the handcraft marketplace app IDUS, while Terra plans “to quickly integrate with all partners.” Local partners include food delivering app Baemin and hospitality app Yanolja.
In June, Terra partnered with a Korean mobile payment service CHAI, which has reached over 240,000 users in its first forty days alone. On July 22, Terra reached a record-high daily transaction volume of KRW 1 billion (USD 842,000) after they ran a special promotion with TMON, and “the response was explosive,” the co-founder said without providing numbers on their pre-campaign results.
Shin, who is also the founder and former CEO of TicketMonster, Korea’s e-commerce platform with USD 3.5 billion in gross merchandise volume, finds that Terra’s main competitors are “the Paypals and Alipays of the world.” To compete, Shin says that they needed to present a clear and straight-forward value proposition to both e-commerce platforms and users. While platforms usually pay a 2%-3% fee to credit card companies and payment gateways, Shin explains that they have their own payments infrastructure set up, in order to offer lower transaction fees, “helping e-commerce partners save millions.” The fee can differ a bit by partner, he says, but that Terra promises to its e-commerce partners transaction fees that are as much as 80% lower than what platforms usually pay.
For clarification, Terra is a stablecoin pegged to the Korean won, listed on CoinOne, GDAC, and GOPAX. Also, Terra is backed by Luna, a mining token, listed on Upbit, Bittrex, CoinOne, GDAC, and GOPAX. To incentivize users to switch to Terra’s payment solution, Terra introduced a protocol that “uses an elastic money supply to keep prices stable,” and if the demand for the stablecoin goes up, its supply is increased to bring the price back down, that way generating seigniorage, which then goes into funding consumer discounts, offering 5%-10% off during every transaction.
Expansion and investors
Terra is also working on geographical expansion. “We’ve started the legwork to launch our blockchain-powered payments service in Singapore and Hong Kong by 2019,” says Shin, and for the next two-three years, they are looking into markets such as Japan, Thailand, Indonesia, and Vietnam. Terra has also partnered with the government of Mongolia “to revamp the country’s financial infrastructure using blockchain, and our product is slated to launch by end-of-year.”
Terra plans to launch different financial services beyond payments. They are currently working with crypto-backed lending solution NEXO , which offers loans in 45 fiat currencies across 200 jurisdictions, to launch Terra-denominated lending and savings products, as a step towards creating more use cases for the stablecoin, while “the ability to borrow against assets instead of selling them would add an incredibly powerful utility feature to Terra,” said Shin.
Furthermore, Terra is working on offline payments and is in talks with undisclosed convenience shops in Korea, and they plan to make an official announcement with their partner in the next couple of months.
Shin says that Terra is always looking for strategic investors, “especially those who have a deep understanding of key markets such as Singapore,” where they plan to expand soon, or those that have “a great e-commerce portfolio,” while they recently received strategic investments from “notable funds such as Kakao Ventures, a subsidiary of Kakao, and LuneX Ventures, the blockchain-focused investment arm of Golden Gate Ventures.” The company is also backed by Binance Labs, Huobi Capital, OKEx, Polychain Capital and others.
Speaking of regulations, when it comes to crypto, local government is worried the most about “scam projects or ‘pump-and-dump’ scenarios where individual investors can be taken advantage of,” Shin explains. He added that Terra is “in constant communication with relevant parties to educate them on blockchain technology and the need for a price-stable cryptocurrency,” while CHAI has the necessary licenses, as well as proper KYC (know your customer) and AML (anti-money laundering) procedures.
Finally, regarding Facebook’s Libra, Shin said that “it’s exciting to see a large corporation confirm the need for a price-stable, global digital currency that has a concrete use case” and that “more and more projects will start seriously thinking about how to get blockchain and crypto into the hands of the masses.”
Meanwhile, in a recent written testimony to the U.S. Senate Banking Committee, co-founder of the Wyoming Blockchain Coalition and 22-year Wall Street veteran Caitlin Long, explained to the lawmakers that “outdated financial regulations” have caused the development of stablecoins such as Libra. If investors could, she said, they would use the U.S. dollar to trade in and out of digital assets.
QUICK TAKE
>> Several stablecoin issuers, including Paxos and Coinbase, are seeing a shift from using stablecoins for trading to using them for payments, and they are strengthening their efforts in this direction
>> For example, Terra, a Korea-based stablecoin startup, has attracted over 240,000 online shoppers to try its payment app and processed over 380,000 transactions
>> For now, using stablecoins as a payment method is largely confined to cryptocurrency holders, but companies are seeking ways to engage more regulator consumers
The potential to buy a slice of pizza with stablecoins may be the gateway for mass adoption of cryptocurrencies, and some stablecoin issuers, including Coinbase, Paxos, and Terra, are pivoting in that direction and have seen some early success.
Coinbase’s payment arm Coinbase Commerce is encouraging shoppers to pay with USDC, a stable coin run by a consortium of which Coinbase is a member, while Paxos allows debit card holders to spend PAX on daily purchases. Across the Pacific Ocean, Korean startup Terra just attracted over 240,000 online shoppers within 40 days to use its tokens to pay for things like coffee, clothes, and baby wipes.
Indeed, this push represents a shift happening within the cryptocurrency market. Stablecoins, which grew up in the trading world as a way to more quickly move in and out of trading positions, are creeping into the world of e-commerce and merchants, executives say.
“If you believe that trading is one of the few early use cases, it sort of makes sense that using it as a payment medium would be one of the subsequent use cases,” said head of Coinbase Commerce Justin O’Brien.
One USDC Pizza? Not so fast
Coinbase Commerce and Paxos are still in the early stage of implementing stablecoins as a payment medium. Previously only accepting BTC, ETH, BCH, and Litecoin, Coinbase Commerce just added USDC as the first stablecoin on its platform over a month ago. This means that merchants can now accept the stablecoins from their customers with Coinbase Commerce. Meanwhile, Paxos recently formed partnerships with debit card issuers spend.com and crypto.com, which allow people who already hold PAX in their cryptocurrency wallets to spend it for daily purchases.
However, in an upcoming episode of The Scoop, The Block’s podcast, Paxos CEO Charles Cascarilla explains why using stablecoins would eradicate the settlement risk that merchants are dealing with under the current payment system.
In the traditional model, merchants would not receive payments at the point of purchase when consumers pay with credit cards. They usually have to wait a few days before the money hits their bank accounts. However, “when you pay with PAX, they immediately get the dollars. It’s sitting in the merchant’s hands and he can go buy something with it immediately. It’s not some IOU he is going to get in a day or two,” said Cascarilla.
In many respects, Terra is ahead of the pack as payment medium used by shoppers.
Unlike some other stablecoin issuers, Terra is not aiming at attracting crypto-believers, according to the company CEO Daniel Shin. Instead, the company mainly uses stablecoins to process payments, which can, in turn, bring down merchant costs consistently and offer constant discounts to customers, Shin told The Block.
“I would think that us building on a blockchain is actually net negative from a sales perspective because it’s a new technology and everyone is scared of new technology,” said Shin. “It’s because we save money and we give attractive discounts to customers that they are willing to onboard.”
The company is proposing as much as 90% reduction in transaction fees to merchants. For example, the Korea e-commerce site TMON on average pays a 2.1% fee per transaction if customers choose to use credit cards as their payment method. With Terra, that number was halved, and the company is looking to push that figure down even further, said Shin.
The startup reported that within 40 days of deploying its stablecoin-enabled payment app on two Korean e-commerce sites, it has processed over 380,000 transactions.
Path to mass adoption
Still, these cryptocurrencies face hurdles. After all, the process to exchange fiat for stablecoins then spend them on goods is confusing to many, if not cumbersome. Consequently, for now, Paxos is focusing on enabling current cryptocurrency holders to spend their holdings outside of the trading world.
“If the first use case of cryptocurrencies has been trading… then stablecoins and what we see with PAX, are to give those same users real-world functionality to spend that money if they choose,” said Paxos’ Simpson.
In comparison, Coinbase Commerce is hoping to attract more people to hold USDC first before it can expand on its payment ambition. “currently the adoption of stablecoins is limited to people that want to trade… There are critical features that need to be implemented to incentivize people outside of the trading community to hold USDC or other stablecoins.”
Since the mainnet launch, Terra community has had many wins — Chai (Terra based payments app) launched to much fanfare and became one of the most widely used blockchain-based apps on both Google Play and the AppStore in Korea. In its first 40 days of operation, it hit 240k purchasing users and reached one mil USD in daily transaction volume. Chai also announced upcoming integrations with Sinsang market (B2B fashion commerce), and Terra is integrating with the popular wallet Bitberry, and Nexo, the cryptocurrency-based lending platform. Through all this, the team is taking important steps to validate their core mission of migrating mainstream commerce to Terra at scale.
From a crypto-economics perspective, Terra has always been an ambitious experiment in the larger narrative around blockchain incentives. Most blockchain reward schemes are cost-centric: They offset the electricity costs of running a miner or the costs of slashing risks from double signing. Instead, Terra has been designing a sustainable and value-centric reward scheme. It focuses on allowing stakeholders to capture a part of the value delivered to the end-users of the network. For that reason, Terra’s economic design never included inflationary block rewards, but was designed around transaction fees in what will soon become a massive and growing payments network.
While they remain strong believers in Terra’s value-centric reward model and its massive growth potential, given the youth of the network today not enough fees are being generated to offset staking risks. Besides server fees, there are many costs to running high quality validators: Marketing and BD costs from courting delegators, technical and operational upkeep from doing software upgrades, consistently improving operational security to prevent slashings and hacks, community building and growing the ecosystem. For token holders, the low transaction fee revenues have meant little incentive to stake given the liquidity cost of the 21-day unbonding period and the slashing risk. Moreover, Terra is operating in a crowded field of other Proof of Stake protocols and should offer solid returns to attract the best validators, get them to invest in the growth of the network, and attract capital to the network. If rewards remained low for a while, it could adversely impact Terra’s network security and rate of ecosystem growth.
In the interest of increasing short term block rewards to offset validation costs and increase the cybersecurity of the network, the signatory validators to this proposal agreed to a solution called Project Santa. Project Santa is a bot that distributes Terra foundation tokens to network stakeholders in order to subsidize block rewards. To kickstart the process, the Terraform Labs validators generously agreed to seed Project Santa with 21.6 million Luna tokens to be distributed over the next year. This results in approximately a 10% staking yield on the 216 million tokens currently staked. Like other block rewards, these tokens will be distributed pro-rata to validators in accordance with the amount of Luna staked. The Terraform Labs validators have further agreed to commit up to 100 million Luna tokens over the next 5 years for further block reward subsidies if block rewards fail to become competitive with the industry standard.
The Santa bot went live on August 9th, 2019, and will remain operational until such time that it is no longer needed by the Terra community. This is a wonderful example of the community rallying together to defend the security of the network security, and ensuring sufficient funding in the development of the Terra ecosystem. They are committed to working closely together to help power Terra’s innovation of money!
Santa Validators,
Chorus One
Hashed
Arrington XRP Capital
Polychain Labs
Certus One
Terraform Labs
B-Harvest
A Team
Dokia Capital
Terraforming
Healings
RockX
Figment Networks
Upcoming travel
- Singapore: 12–6th August
- Berlin: 21–23rd August
- Hong Kong: 26–8th August
Finance
Starting from 12 August 2019 stablecoin TerraSDT (SDT) and Terra’s mining token Luna (LUNA) — will make their debut on the Bitrue exchange! See below for the detailed schedule:
Terra has designed a decentralized stablecoin that powers the next-generation payments system. Terra is a family of stablecoins that are each pegged to the world’s major currencies, such as USD, EUR, and KRW. Terra’s flagship currency, TerraSDR, is pegged to the IMF’s SDR, which is considered to be the most price-stable currency in the world. The stablecoins are backed by Luna, the protocol’s mining token which receives Terra’s transaction fees. In other words, Luna’s value grows as Terra’s transaction volume grows.
To get its stablecoin used by millions, Terra has built a formidable e-commerce alliance across Asia, which includes unicorns such as TMON (eCommerce, Korea), Baemin (Food Delivery, Korea), and Carousell (C2C platform, Singapore). These mainstream platforms are to integrate Terra’s blockchain-based payment solution and help grow the Terra economy.
Roadmap
What’s next?
A key step to create a robust Terra/Luna on-chain market is finding the right algorithm, and here’s what the Terra team are exploring for the next iteration of mainnet Columbus.
Automated market makers are routinely adopted in a number of contexts, from financial to betting markets and have recently been proposed as an efficient way to set prices in the cryptocurrency space. Their role is fundamental, and finding the right protocol is key to the successful launch of any new market.
There are many challenges in finding the right algorithm, as it should be compatible with the specific characteristics of the market, such as its liquidity, and its features should minimize the scope for arbitrage opportunities and erratic price behavior. On the way to a robust Terra/Luna on-chain market, the team has reviewed several automated market-making algorithms. In this article, they are going to share some of their learning and discuss the main features behind the Logarithmic Market Scoring Rule and the Uniswap model, as these are the two most popular market-making algorithms. Below, they walk through the mechanics of each approach and discuss the potential merits and drawbacks. They also briefly discuss the applicability of these approaches to Terra’s on-chain swap mechanism.
Partnerships and team members
Singapore-incorporated, South Korea-focused stablecoin creator Terra has signed a major Korean B2B platform to its alliance of internet marketplaces.
According to a report on Econonews, a local financial website, Terra has agreed to work with Sinsang Market, a company that links vendors at Seoul’s Dongdaemun fashion market with customers in Korea and elsewhere in the world.
The two will develop a payments system to offer end-to-end capabilities for wholesale transactions, including payments, settlement and delivery. It will utilize CHAI, a South Korean mobile payments platform powered by Terra’s blockchain technology.
Dongdaemun fashion market is one of the largest fashion wholesale markets globally, with an estimated $12 billion of turnover but at present it remains fragmented and relative poorly developed in terms of logistics and payment services. The hope is to connect the many small enterprises operating there more efficiently with their target markets.
According to other local press reports, Sinsang Market works with 18,000 wholesalers carrying 28 million products.
One of Terra’s core strategies is to build an alliance of ecommerce sites and operate as a payment platform for them. The Terra coin may also be offered as an incentive for those making purchases on these sites.
Terra has approximately 25 such relationships already. The list of partners includes: South Korea’s TMON, also known as TicketMonster; The Galleria, a Gangman K-fashion mall; Qoo10, a Singapore-based online marketplace which claims to be the largest of its kind in the world; and Carousell, a Singapore-based online retailer.
Terra, which is incorporated in Singapore as TerraForm Labs, was founded in 2018 by Daniel Shin, who also founded TMON, and has broad connections with South Korea’s Kakao and investment from Seattle-based Arrington XRP Capital.
Rumours
No updates
Social media metrics
Social media activity:
The charts above illustrate the overall growth in the number of Twitter followers and YouTube subscribers.
The graph above shows the dynamics of changes in the number of Terra Twitter followers. The information is taken from Coingecko.com.
