Terra Founder Wants LUNA to be a Layer-2 for Bitcoin?

Paigambar Mohan Raj
Source: Unsplash

In a recent episode of the Unchained podcast with Laura Shin, Terra (LUNA) founder, Do Kwon, has said that Terra is a layer-2 solution for Bitcoin (BTC), that Bitcoin only needs to be good at one thing, and that is to be a valuable asset.

With Terra (LUNA), Kwon believes that Bitcoin can have a bridge towards other use cases “across a multitude of applications from DAOs to NFTs to DeFi.”

Kwon has admitted that a drop in Bitcoin’s price would be “negative” for the UST stablecoin’s stability, but he expects Bitcoin (BTC) to rise. Kwon told Shin that he believes in BTC’s long-term growth and is unconcerned about short-term volatility.

Kwon says,

“I’m sort of betting that the long term scenario of Bitcoin going up and the reserves being strong enough to withstand UST demand drops is the more likely scenario.”

In the podcast, Kwon says that many people think Ethereum (ETH) will eventually flip Bitcoin (BTC) in value as ETH has more use cases. However, Kwon begs to differ. He thinks Bitcoin will still hold the top spot as it is calcified and very slow to change to innovation. Ethereum, while changing less quickly than some of the other smart contract platforms, still changes a lot more quickly than Bitcoin.

In Kwon’s opinion, Ethereum doesn’t have the same founding myth or the Lindy effect as Bitcoin. For those who may not know, the Lindy effect is a theoretical phenomenon in which the future life expectancy of non-perishable objects, such as technology or ideas, is proportional to their current age.

Will Terra be the top Bitcoin holder?

Terraform Labs, the company behind the Terra (LUNA) blockchain platform, intends to buy $3 billion worth of Bitcoin as a reserve for the UST stablecoin.

Kwon has been purchasing Bitcoin (BTC) to keep in Terra’s treasury as 40 percent of the UST stablecoin’s collateral. Terra has so far acquired 30727.9 BTC, with the most recent purchase being 2,943 BTC on March 29. Terra is now the third-largest BTC single-wallet holder.

Kwon has stated that one of the main objectives for the Luna Foundation Guard (LFG), Terra’s treasury, is to turn Terra into “the largest single-wallet holder of BTC.” According to Bitcoin wallet tracker Bitcoin Treasuries, Kwon will need to gather more than 125,051 BTC to dethrone the current top, Michael Saylor’s MicroStrategy.

The crypto community was taken aback by Kwon’s remark. Antiprosynthesis, an Ethereum (ETH) developer, responded with a tweet questioning if all entities using BTC to fund a stablecoin could be considered Layer-2 solutions.

He said,

“Even I don’t believe that Bitcoin’s standards have plummeted to such extent.”

At the time of publication, Terra (LUNA) was trading at $100.73, while BTC was trading at $44,646.21.