Terra LFG
A dashboard that updates daily to display the Luna Foundation Guard yield reserve. As well, provide at least one visualization and one metric that is related to the yield reserve’s growth or depletion.
The Luna Foundation Guard (“LFG”) is a nonprofit organization established in the Republic of Singapore dedicated to creating and providing greater economic sovereignty, security, and sustainability of open-source software and applications that help build and promote a truly decentralized economy. Through community stewardship, fostering innovation, and supporting the research and development of various aspects enveloping open-source software and applications, the LFG serves as a vital nexus of resources and guidance for an emerging DeFi technology stack.
What is the UST reserve
The UST Reserve serves as a perpetual decentralized asset reserve for members of the community. It's 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 the peg by swapping UST for major, non-correlated assets like BTC that capitalize the reserve. The reserve functions as a release valve for swelling pressure to exit UST to LUNA on-chain, dampening the reflexivity of the system by reducing the dilution of the LUNA supply during severe contractions and restoring the peg in real-time, and maintaining an alternative arbitrage opportunity outside of the Terra protocol itself.
On 21st of January 2022, LFG received 50M Luna from Terraform Labs to run their operations, in late February they announced the news about BTC reserve with several vesting contracts to investors.
source - https://lfg.org/missionandvision/
- LFG has sent $1.1B worth of LUNA(19.47M) to a vesting contract on the 16th of February 2022.
- However, there were two other days that LFG has created vesting contracts amounting to $458.9M on 28th of February and $441.25M on 8th of March.
- LFG wallet was funded 50M on 21st of January 2022
- 11th of February LFG sent 9.5M LUNA to mint UST to refill depleted Anchor reserves.
- 4th of March sees another 5M LUNA sent to mint UST which should be available as a yield reserve.
- Curve pool was also helped by burning 4.2M LUNA starting from 10th of March
~418M UST were minted for yield reserve from 4th of March to 8th of March 2022.
Now then how will this yield reserve funded
Also LFG received a 12M LUNA again on 11th of March for the future.
So, how LFG funds were being locked in vesting contracts.
However, this amount has been sent to an ETH(Curve) address(0xe3011271416f3a827E25D5251d34A56d83446159) through Wormhole, It's highly likely to help the curve pool as it's very critical while the UST mints that are supposed to be minted for Curve would be available in one or two days as it's been still minted(as of the writing of this analysis, 11th March 2022 2PM UTC). Therefore these proceedings will be available for the yield reserves probably including the LP rewards from Curve pool.
So, let's look at how the minting happens:
Final words,
This Luna Foundation Guard actually works as a guardian angel of the ecosystem helping protocols when needed like Anchor and also Curve when it was in a dire situation. However, to sustain the growth of the ecosystem, the decision to create a reserve for UST was praised highly by the community.
So, the miniting is happening rapidly at the moment 1000 LUNA per hour.
Metrics to watch out for this reserves
One way that could potentially deplete this reserve is when UST demand is so high and LUNA supply is low, then to maintain the peg and reduce the pressure on LUNA these reserves could release UST. Let's look at how the circulating supply and UST demand over time to get a glimpse.
The peg needs to be always maintained at 1 USD per UST, when the UST goes down from 1 USD there will be an opportunity for arbitrage where people can swap(burn) luna to buy at a premium which will help UST to regain the peg similarly when UST goes up in price people can swap their UST for Luna at a premium while it helps UST to stabilize. These reserves will come in handy when the circulation supply of Luna is low, remember unstaking takes 21 days and/or when there is a huge demand in UST.
Special thanks to: Pinehearst#1947 and lambdadelta#7856