Terra Is a New Ambitious Crypto Project To Create a Stable Coin Via E-Commerce
A new project has appeared on our radar after receiving funding from four of the largest crypto exchanges in the world. Terra, a new stable coin project, has received $32 million USD in investments to develop a truly stable token that would use e-commerce as its anchor.
Binance Labs, OKEx, Huobi Capital and Dunamu (which controls the Korean Upbit) have all spent some money investing in Terra. This has obvious reasons and one of the most important ones is that the founding team of Terra is led by Daniel Shin, founder and president of TicketMonster.
If the name TicketMonster does not ring a bell for you, you should know that this e-commerce firm has been owned by both Groupon and Living Social and that it is worth $1.7 billion USD.
This is actually the first time ever that global exchanges decide to come together and invest in the same deal, so we may have something promising here. The other investors include Polychain Capital, China’s FBC Capital, Hashed, 1kx, Kenetic Capital and Arrington XRP, founded by Michael Arrington.
Unlike most deals which are based on equities, this one is based on tokens. Terra will have a private sale in the coming weeks to add more capital to the company targeting highly strategic investors. The company will have a public sale later and will offer tokens via the exchanges that made the partnership.
Will This New Stable Coin Work?
Stable coins are tokens that remain at the same price, which is good for markets like the crypto one because it is so highly volatile. They are typically pegged to the USD, which is the more stable currency in the world.
However, most stable coins simply do not work very well. Most of them are unable to retain their value and then keep fluctuating a lot. The most successful one is Tether, which was backed by Bitfinex and it is widely known for its USDT tokens. There are some criticisms around Tether, though, as some people believe that the Bitcoin rise in late 2017 was made mostly fuelled by Tether manipulation.
While Tether is certainly the best example of a stable coin, it has to inject hundreds of millions of dollar to keep the prices steady, so you can basically say that the concept does not work so well after all.
What Is Terra?
Will Terra be able to actually change this paradigm and become the first major successful stable coin without having to spend a lot of money like Tether does? Maybe and most investors are betting on this. The token will serve as a gateway to leverage of the Asian e-commerce market.
However, it should be duly noted that Terra, while marketed as a stable coin, is more of a fintech platform similar to Alibaba’s Alipay but using blockchain technology to reach markets in Korea and other parts of Asia.
According to Shin, Terra will be a compliment to existing payment solutions and will allow customers to use its token. Merchants could use to circumvent payment networks like Visa, which can take a part of their revenue most of the time. He also believes that there is potential for users that did not adopt to cryptocurrencies yet.
Terra already has a list of 15 e-commerce partners including Woowa Brothers, Qoo10, Carousell, Pomelo and Tiki. Together, these companies boast more than 40 million customers per year. The company is targeting Asia because it is one of the most active crypto regions in the world and this will help in the plan of becoming a stable coin.
The stability engine of Terra is based on a second token Luna. This token will be used as collateral by accumulating revenue by taking only small transaction fees when people use the main token. According to Shin, an algorithm will use Luna to buy back Terra tokens and try to keep the prices more or less stable while it burns tokens to maintain stability in recession periods.
You learn more by reading the whitepaper of the company if you want to.
The Alipay of the Blockchain
However, stable coins aside, the most interesting aspect of Terra is that it has a clear plan to become the next Alipay. Alibaba’s affiliate Ant Financial, which runs Alipay, may not be well-known among the West, but it is valued at over $100 billion USD, being one of the most important companies in the world.
Alipay is the dominant mobile payment service in China and it has a digital bank and lending products now. The company has over 500 million users and has been aggressively buying other companies in Asia.
Terra’s goal is to use the leverage of e-commerce to go beyond simple payments and become a full-fledged financial platform that can attract users in Asia. The company will start the launch at the end of 2018 and will expand to Southern Asia in 2019. During 2020, Terra will have third party developers and a more stable model of business.
According to Shin, the best plan is to create a huge base of users and then open up the platform little by little. While it is still too early to tell how will the platform look like in the future, it is surely a very ambitious platform with lots of potential to become the next Alipay of the blockchain.
While it is not clear if Terra will actually succeed to have a stable coin, it has a good chance to establish itself as an important company in the Asian e-commerce market.