Welcome, Crypto Dummies!
If you’re new here, this substack is focused on educating those that know nothing about crypto and blockchain technology.
If that’s you then you’re in the right place!
Our goal is to educate anyone entering the space for the first time, we know it’s a lot to take in. We break it down so you don’t have to!
We've covered various topics in the past, and gone into detail with some of the most promising projects that have emerged in the space.
Feel free to check out some of our older posts for more information.
Today’s post will be a short one, we’ll do a brief overview of some of the most notable events as of late, as well as an important tip for beginners.
With that being said, let’s get started!
Terra(LUNA) and BTC
Whether you’re new to the blockchain space or not, there has been a lot of talk surrounding Terra (LUNA) lately.
Specifically, regarding Do Kwon, the mind behind Terra’s native currency $LUNA, and the protocol’s US dollar stablecoin, $UST.
Before we can jump into the latest news surrounding Terra, what is it exactly?
Terra is a blockchain protocol for issuing algorithmic stablecoins and creating a decentralized financial infrastructure. Using Terra, participants can earn interest on stablecoins, spend crypto with merchants, and replace almost all banking needs with the decentralized finance protocol.
Terra is also a smart contract-enabled blockchain hosting a rapidly growing ecosystem that is connected through Cosmos.
Note: Terra and Cosmos will be covered in greater detail in future posts. Stay tuned!
How does this tie in to all the news surrounding Terra?
Terra’s Do Kwon stated on March 30th, that his goal is to become the largest holder of Bitcoin after Satoshi.
But how does this tie into Luna?
$UST is an algorithmic stablecoin introduced by the Terra protocol.
It is neither backed by $LUNA nor $BTC, it is fully algorithmic, and maintains its peg through a system of arbitrage and protocol mechanisms. Users can mint UST by burning an equal dollar amount of $LUNA and vice versa. If $UST demand exceeds the current supply, arbitragers have the opportunity to burn $LUNA on-chain, mint $UST, and pocket the difference to the peg as profit. If $UST trades under the $1 peg, arbitragers are incentivized to burn $UST to restore the peg and buy 1 $UST for less than a dollar and get $1 value in $LUNA and can then trade $LUNA on the open market to secure a profit.
How does Bitcoin fit into all of this?
The Luna Foundation guard recently established a decentralized UST Reserve Protocol. A non-profit initiative to provide a further layer of support to ensure that $UST maintains its peg.
In an event where the market price of UST materially deviates from the USD peg, holders of UST will be able to close the arbitrage and bring the market price of UST back to peg by swapping UST for major, non-correlated assets like BTC that capitalize the reserve.
-Luna Foundation Guard.
If BTC won’t back UST as a stablecoin, then what will it do?
The reserve will act as a market participant, the $BTC reserve becomes a decentralized $UST buyer. Participants can buy Bitcoin at a discount from the reserve if it trades below $1, the reserve will add $UST and distribute $BTC, creating a hard backstop for the $UST peg. IF $UST is trading over the peg, market participants will be incentivized to sell $BTC at a premium for $UST.
Thus incentivizing users to restore the peg to $UST.
Whether you’re a crypto expert or a crypto dummy, one thing is for certain, Terra has established itself as a driving force behind decentralized finance. Its algorithmic stablecoin $UST will certainly be the driving force behind the transition to decentralized finance around the globe.
Remaining anonymous is extremely underrated.
If you’re still reading this substack, odds are you’re familiar with the Bowtied movement and the idea behind maintaining an anonymous digital identity.
Bowtied Bull mass-introduced this concept by creating a ‘jungle’ of cartoon animals that have provided an extraordinary amount of information regarding this space and many other niches.
The goal?
To remain anonymous in a world that has grown tired of ‘flexing.’
You don’t need to be a genius to understand the state of current events, the middle class is suffering. A cartoon bull sporting a blue bowtie has warned us about this for months.
This is not new.
The world is on the path to adopting blockchain technology. With blockchain technology comes decentralization, open-source code, and public transaction records.
This is where staying anonymous is critical.
You don’t need to be a crypto veteran to know about Bored Apes, and odds are at least one of us knows someone that owns a Bored Ape. The community likes to ‘flex’ their six-figure NFT with exclusive merchandise and they tend to flaunt their holdings on social media.
This inevitably puts a target on their back.
We have seen the Bored Ape community become victims of various cyberattacks that result in holders losing their NFTs or having their private keys stolen.
Ex.
Crypto is a new frontier and the transition into web3 will be full of opportunities to make life-changing profits. As we adapt to the new paradigm, safety always comes first. If you’re one of the lucky few who holds a six-figure NFT, the last thing you will want to do is flaunt it with your personal information. Unless you like having a target on your back.
Let’s face it, remaining anonymous is the only way to go.
Some of the most influential participants of the crypto space sport an anime profile picture and provide more value than those that ‘flex’ their six-figure NFT.
Keep your keys safe, use a hardware wallet, remove all coins off exchanges, and remain anonymous. Some words of advice from a cartoon sabertooth.