Terra Liquidity Alliance: A Lifeline for the Ecosystem?
The Terra ecosystem has faced significant hurdles recently, including the withdrawal of key liquidity providers and an exploit involving Axelar Assets. has faced significant hurdles recently, including the withdrawal of key liquidity providers and an exploit involving Axelar Assets. These events have led to critically low levels of LUNA-stablecoin liquidity. In response, the Terra community has proposed the Terra Liquidity Alliance (TLA) as a multifaceted solution to revitalize the ecosystem.
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The Terra Liquidity Alliance: Aims and Objectives
The TLA’s primary goal is to establish a deep on-chain market for LUNA-stablecoin pairs and foster a decentralized, community-driven mechanism for managing liquidity and project incentives on Terra. By achieving these goals, the TLA aims to:
- Increase on-chain activity
- Boost trading volume
- Enhance overall ecosystem engagement
Key Components of the TLA
The TLA leverages several innovative features to achieve its objectives:
- ve(3,3) Tokenomics: This system incentivizes liquidity providers (LPs) through voter escrow tokens, reducing overall token supply and rewarding active participation within the ecosystem. It also promotes efficient resource allocation and encourages fair competition among Terra Decentralized Exchanges (DEXs) for liquidity and rewards.
- Bootstrapping LUNA-Stablecoin Liquidity: The TLA aims to bootstrap an initial liquidity depth of $10 million for LUNA-USDC and LUNA-USDT pairs across Terra DEXs. Additionally, whitelisting options will be available for ecosystem projects, allowing community-driven decisions regarding liquidity allocation.
- Enhanced Utility and Revenue for LUNA Holders: The TLA introduces mechanisms for LUNA holders to participate in voting, earn bribes through “bribe mining”, and benefit from rebase rewards. This fosters a positive feedback loop by incentivizing active engagement in the ecosystem.
- Building Protocol-Owned Liquidity (PoL): A 10% annual take rate will be levied on LP staking to build community-owned liquidity, reducing reliance on external incentives.
- Fair and Market-Based Incentive Mechanism: DEXes will compete for Alliance Rewards, fostering a dynamic and decentralized environment for liquidity provisioning.
- Alliance Module Integration: By leveraging staking rewards, the TLA incentivizes LUNA-stablecoin liquidity, ultimately driving higher chain activity and trade volume on Terra.
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Launch Plan
The TLA launch plan involves configuring three new Alliances through the Terra Station’s Alliance module:
- Stablecoin Liquidity Alliance: This alliance focuses on LUNA-stablecoin liquidity, offering a share of 8% staking rewards and targeting $5 million in total liquidity. LP rewards are estimated at 50% APY with a gradual increase over three months.
- Project Liquidity Alliance: This alliance targets liquidity for Terra ecosystem projects, offering a 4% share of staking rewards and aiming for $2.5 million in liquidity. LP rewards are also estimated at 50% APY with a gradual increase over six months.
- Bluechip Liquidity Alliance: This alliance aims to attract bluechip assets to Terra, offering a 4% share of staking rewards and targeting $2.5 million in total liquidity. Similar to the other alliances, LP rewards are estimated at 50% APY with a gradual increase over six months.
The Terra community voted in favour of funding for the TLA development in June 2024. With development complete and fully audited, the TLA is poised for launch, offering a potential lifeline for the Terra ecosystem.
Disclaimer: This information is intended for general knowledge and informational purposes only. It does not constitute financial advice.
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Dr. Olajide Samuel juggles the demands of medical studies with a passion for cryptocurrency. A seasoned blogger, Olajide shares his vast global knowledge of the crypto space, offering insights to enthusiasts. Despite his busy schedule, his commitment to crypto remains strong, and he actively seeks ways to contribute to its future.
