The core ethos of Terra, crypto, and defi as a whole is to democratize access to the tools that are traditionally restricted to large, capital intensive, connected institutions. This is not how Luna is progressing, it is becoming US and UST focused, with almost all Luna burns being for UST which is then thrown into Anchor. We can even see that here in Mars where UST is the only synthetic fiat available to borrow and lend.
Beyond the fiscal and macroeconomic issues of being based on a currency that is going through generational highs of inflation, the ecosystem is ignoring the rest of the world.
I propose that to further increase the robustness, strength, and value proposition of Terra/Luna as a global decentralized hub for finance, savings, and an alternative to the traditional system, that we open borrowing and lending to all synthetic fiats currently supported.
This increases the value proposition of Terra multifold:
- Allowing the ability to express directional opinions on relative values of fiat currencies.
If I want to protect myself from US dollar inflation, I may swap for a less inflationary currency
(or basket of currencies) and use it as collateral to short UST to hedge against dollar inflation
- It does not force non-US residents to make their investments in dollar terms, further
protecting themselves from monetary and fiscal policy unrelated to their lives
- It will increase revenue to the platform and MARS stakers via liquidations of those unfortunate
users who do not manage their risk properly (sad truth)
- It will help maintain the proper price peg of synthetic fiats by increasing liquidity in those
respective assets and the ability to arbitrage out innefficiencies.
The issue here clearly involves liquidity in the other synthetic fiats, but if Terra is truly aiming to be a global alternative to the financial system, it cannot rely solely on UST pegged assets, especially as the global financial system is bifurcating along geopolitical lines with the ongoing conflict in Eastern Europe.
I would appreciate any thoughts, and especially criticisms of this proposal, as I think this could be a strong step forward to increase resiliancy of the ecosystem to country-specific monetary and fiscal risk, and continue to push Terra/Luna forward as a viable alternative to TradFi