$10M Fund From Cosmos-Based Terra Will Gladly Back DeFi Projects on Ethereum

The fund will pay for the one thing devs can't do internally: security audits.

AccessTimeIconFeb 4, 2021 at 2:00 p.m. UTC
Updated May 9, 2023 at 3:15 a.m. UTC

The creators of the Tendermint-based Terra suite of stablecoins are opening a fund to foster its tokens' usage anywhere people are doing decentralized finance (DeFi) – and that primarily means Ethereum.

Announced Thursday, Terraform Labs has launched a $10 million fund, Terraform Capital, to drive integrations of either its dollar-pegged stablecoin, TerraUSD (UST), or its governance token, LUNA, throughout DeFi by covering the cost of security audits. This follows right after a $25 million funding round from many of crypto's biggest venture capitalists last month.

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  • "Main objective of fund: increase integration of UST on Ethereum’s DeFi stack," Do Kwon, a co-founder of Terraform Labs, told CoinDesk in an email. "Expected ROI: high – can fund a hundred audits with a few successful integrations."

    The fund is setting up a slate of security auditors to be ready to move fast and get new offerings out the door with the security assurances early adopters want. Right now they have a few firms on deck to do the work: Sentnl, Quantstamp and Solidified.

    "In 2020 alone, over 240 million USD worth of digital assets were lost or stolen as a result of DeFi hacks, but no funds have been compromised in code audited by Quantstamp," Quantstamp CEO Richard Ma said in a press release.

    As noted, Terraform wants to foment use of UST and LUNA, but it's not worried about which blockchain the project is built on. Though a Tendermint blockchain, this fund is happy to invest anywhere Terraform's cryptocurrencies can be ported.

    "We want this fund to accelerate the amount of building that can happen on Ethereum (and whatever other layer 1s of the builders' choosing)," Jeffrey Kuan, of Terraform's business development team, told CoinDesk in an email.

    He said security audits are the main cost barrier for these new teams. "We're hoping that the fund can reduce friction as much as possible for promising teams that are building, with the goal of increasing the GDP of the blockchain ecosystem," Kuan said.

    Whatever-maximalists, take note: This kind of fund is about the fundamentals driving a token battle rather than furthering any of crypto's tribal fights.

    One of the original backers of Terraform Labs, Michael Arrington, founder of Arrington XRP Capital, told CoinDesk in a phone call that it just doesn't matter to LUNA holders where UST gets used, because the two tokens are inextricably linked. 

    "If there's a product that uses UST, it drives LUNA demand," Arrington said. "Whether it's on Ethereum or Cosmos, it doesn't matter."


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