Finance Redefined: Terra expanding UST and LUNA, and Aave Arc seeks institutional adoption, Dec. 31–Jan. 7

Welcome to the latest edition of Cointelegraph’s decentralized finance newsletter.

The new year is upon us, and the expectations for DeFi innovation, utility and mainstream adoption are greater than ever. Read on to hear about the inaugural stories of 2022.

Reading this article, you're only receiving a portion of the content from our DeFi newsletter. Drop your email below for the full copy.

Terra Research proposes new utility for TerraUSD and LUNA

Decentralized algorithmic stablecoin issuer Terra published an ambitious proposal via its research team this week to expand the interchain deployment of its TerraUSD (UST) stablecoin across five projects on Ethereum, Polygon and Solana.

Titled “UST Goes Interchain: Degen Strats Part Three,” the lengthy governance post extensively detailed the methods and procedures in which Terra’s native token, LUNA, and $139 million of TerraUSD (UST) could be deployed to “bring awesome UST use-cases to Ethereum DeFi.”

In the proposed strategy, which has gained 3,500 views and six replies from community members who self-titled themselves Lunatics, Terra would deposit between $250,000 and $50 million in UST in a bid to boost the stability of each of the new partner projects. It is expected that a community-led governance vote will occur in the near future to determine confirmation.

DeFi liquidity provider and market maker Tokemak would receive $50 million in UST for a maximum of six months, and lending and borrowing platform Rari Fuse would receive $20 million in UST across the same period. Yield aggregator Convex Finance would receive $18 million, while OlympusDAO would get $1 million in UST bonds and $425,000 in LUNA incentives for three months.

The distribution of UST across a plethora of projects will support Terra in accelerating quantitative ambitions such as that of its market capitalization within the stablecoin market. At the time of writing, Tether’s USDT leads the way with approximately $78 billion, with Circle’s USDC in second with $43 billion, followed by Binance’s BUSD at $14 billion, and finally UST with a market cap of $10 billion.

“Bond $1m UST with Olympus and 3,3 the OHM forever” https://t.co/eCDH9fG0Wt

— OlympusDAO (@OlympusDAO) January 6, 2022

In a recent tweet, Terra founder Do Kwon divulged his ambitions to propel the network native asset UST to the forefront of the stablecoin market, ahead of stalwarts USD Coin, Tether and Binance USD (BUSD), among others.

Related: Terra (LUNA) hits record $20B TVL, surpassing Binance Smart Chain

New service Aave Arc aims to enhance institutional adoption in DeFi

Decentralized lending platform Aave announced the launch of its permissionless lending and liquidity pool, Aave Arc, this week with the ambition of fostering greater institutional participation in fully regulated and compliant decentralized finance services.

Thirty organizations were granted primary whitelist entry to the service, including digital asset custodian Fireblocks, alongside Anubi Digital, Canvas Digital, SEBA Bank, GSR and crypto yield aggregator Celsius.

Following the successful completion of prerequisites such as Know Your Customer and Anti-Money Laundering protocols, these firms will gain exclusive access to “securely participate in DeFi as liquidity suppliers and borrowers” in a market that has soared 10 times in total value locked over exactly 12 months — from $30 billion to $300 billion.

Aave CEO and founder Stani Kulechov shared remarks on the potential for the expansion of the DeFi market with the implementation of this new service, stating:

"DeFi represents a powerful wave of financial innovation including transparency, liquidity, and programmability–and it’s been inaccessible to traditional financial institutions for far too long. The launch of Aave Arc allows these institutions to participate in DeFi in a compliant way for the very first time.”

Related: Without staking, institutional crypto investors cannot escape inflation

WonderFi acquires parent company of Bitbuy for $162M

DeFi platform WonderFi Technologies agreed to purchase First Ledger Corp, the parent firm of the first regulated crypto exchange in Canada, Bitbuy, this week for an impressive $162 million in a bid to expand the presence of cryptocurrency and DeFi across the country.

Backed by renowned billionaire investor Kevin O’Leary, WonderFi detailed its method of funding the takeover through the issuance of 70 million new shares, paying $15.7 million in upfront cash in addition to $23 million in deferred cash via a vendor-take back note due in 12 months. Alongside this, the team stated that it was going to “retain substantially all current Bitbuy employees and enter into employment agreements with key members of the management team.”

Established in 2016, Bitbuy became licensed by the Ontario Securities Commission as a fully regulated crypto exchange in Canada after last November. The platform has over 375,000 users who have transacted more than $3.4 billion. In May 2020, the Toronto-based exchange launched the world’s first 1:1 Bitcoin deposit insurance scheme for its customers.

Commenting on the importance of licensed marketplaces within the digital asset ecosystem, WonderFi CEO Ben Samaroo stated:

“The integration of Bitbuy’s product suite will accelerate and expand the reach and scope that WonderFi can offer to the market, and will drive long-term growth and value for the company.”

Related: Kevin O’Leary says his crypto holdings could reach 20% of his portfolio

Token performances 

Analytical data reveals that DeFi’s total value locked slightly decreased by 6.5% across the week to a figure of $131.8 billion, largely in line with the overall market downturn.

Data from Cointelegraph Markets Pro and TradingView reveals that DeFi’s top 100 tokens by market capitalization have mainly been bullish over the last seven days.

Secret (SCRT) took the lead this week with 26.6%. Chainlink (LINK) grew by 24.2%, while Fantom (FTM) almost exactly replicated last week’s gains with a further rise of 23.4%. Yearn.finance (YFI) and Dai — yes, the stablecoin — claimed fourth and fifth places this week with 8.2% and 0.03%, respectively.

Interviews, features and other cool stuff

DAOs are the foundation of Web3, the creator economy and the future of work3 key metrics show DeFi’s TVL on the verge of a new ATHOracle tokens turn bullish as blockchain projects focus on interoperability

Thanks for reading our summary of this week’s most impactful DeFi developments. Join us again next Friday for more stories, insights and education in this dynamically advancing space.