Galaxy, Coinbase Bet $25M on DeFi Using Terra Stablecoins

The backing will help Terraform Labs build more apps on its Tendermint-based blockchain.

Jan 26, 2021 at 3:00 p.m. UTC
Updated Sep 14, 2021 at 11:01 a.m. UTC

Terraform Labs has raised $25 million in a new round from Galaxy Digital, Coinbase Ventures, Pantera Capital and others.

The stablecoin for e-commerce creator has already proven people will use its volatility-free tokens in decentralized finance (DeFi) to buy synthetic stocks, and plans to attract blockchain denizens to even more use cases.

"We look forward to using the funds for building key pieces of infrastructure in the Mirror Protocol for synthetics, Anchor Protocol for savings and other killer DeFi applications to make Terra's algorithmic stablecoins the centerpiece of the decentralized finance movement," Terraform's co-founder Do Kwon said in a press release.

Terraform Labs is behind a platform for minting different stablecoins for e-commerce that mimic the value of various fiat currencies. It's also behind the Chai payments app, an e-commerce wallet that's widely used in Asia and powered by stablecoins.

"The Terra ecosystem has brought the benefits of programmable money to commerce and will do the same for finance," Pantera Capital's Paul Veradittakit said in a press release.

Previous investors Hashed, Arrington XRP and Kenetic Capital also participated in what Terraform Labs is calling a "growth fundraising round."

"Terra has already made a successful payment case for more than 2 million users in the Korean market, and is also rapidly growing in the DeFi space," Simon Kim, CEO of Hashed, said in a press release.

Founded in 2018, with a co-founder behind one of South Korea's larger e-commerce sites, Terra launched with $32 million in backing from Binance and Polychain, among others. Each Terra stablecoin (such as TerraUSD or the one tracking the South Korean won, TerraKRW), relies on the system's LUNA token to maintain its peg.

LUNA is the governance token for the blockchain, as the white paper explains. It is minted and burned in order to enforce the peg for any Terra stablecoin, so the governance token absorbs the volatility to defend its stablecoins' utility.

DeFi catalyst

Most entrepreneurs on Ethereum agree that DeFi Summer never would have happened had stablecoins not proved they could stay stable.

The Terra stablecoins are notable because they operate outside the Ethereum ecosystem, the platform most associated with DeFi. Terra's blockchain is Tendermint-based, making it part of the larger Cosmos ecosystem.

Terraform says its blockchain generates $13 million in fees annually. Its payments system, Chai, has 2 million users and sees $1.2 billion in transaction volume using its TerraKRW stablecoin, which tracks the price of the South Korean won.

Last summer, Terraform teased a DeFi savings platform called Anchor, which generates a better interest rate for savers by backing proof-of-stake networks. Originally slated for October 2020, it's currently projected to go live in the first quarter of 2021.

"On Anchor the protocol work is done but we are doing integrations with a well-known partner so we can launch together. Almost there," Kwon told CoinDesk in a followup email.

Terraform also dropped a new synthetic equities market last month called Mirror. This enables anyone anywhere to buy tokens that follow the price of any equity in the U.S. stock market.

The new funding will be used to expand those use cases, build new DeFi projects that use its tokens and extend its interoperability to additional blockchains, Terraform said.

"We love the expanding use case of the base payments product and the incredible new demand for LUNA that products like Mirror are creating," Michael Arrington, founder of Arrington XRP, told CoinDesk in a text message.

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