Four cryptocurrency exchanges — including market leader Binance — are throwing money into Terra, a new stablecoin.
Stablecoins are sometimes-controversial cryptocurrencies meant to provide a safe haven for those looking to hold their digital assets’ value.
The most commonly known stablecoin is Tether (USDT), which is meant to be pegged to the US dollar. For example, users may sell their Bitcoin for USDT — as opposed to actual fiat currencies — allowing for quick and easy trades when the market is moving.
Aspirations in E-Commerce
As reported by Fortune, Terra is a new stablecoin project that has already raised $32 million from both cryptocurrency exchanges like Binance (via Binance Labs) and investment funds like Polychain Capital.
Terra’s claim to fame, however, is that it is reportedly partnering with various e-commerce ventures in Asia in hopes of facilitating mainstream adoption of the cryptocurrency.
Shin also claims the cryptocurrency will be beneficial to both consumers and merchants. The former will reportedly get discounts, while the latter will benefit from reduced transfer fees when compared to credit cards.
The largest question surrounding Terra is how it will actually maintain stability in an extremely volatile marketplace.
Unlike Tether, which purports to be backed by USD at a 1:1 ratio, Terra has long-term plans to be stabilized by a secondary reserve cryptocurrency funded my small transaction fees. However, it first will need to be backed by the fiat currency provided by its investment partners — hopefully, $100 million.
What do you think about Terra and other stablecoins? Do you think Tether is really backed by dollars at a 1:1 ratio? Let us know your thoughts in the comments below!
[Full Disclosure: The author of this article holds Tether (USDT) at the time of this writing.]