Former Terra-Affiliated Project Kujira to Issue Stablecoin

Kujira, the crypto project that was building on the Terra Classic blockchain and moved to layer 1 protocol Cosmos after Terra’s implosion, is about to issue a stablecoin called USK, the firm announced Monday in a blog post.

“Inspiration” to craft USK, says the team, came from decentralized lending protocol MakerDAO and its stablecoin DAI.

Kujira is a blockchain development project that first was active on the Terra network. The effort created ORCA, a liquidation tool on the contentious Anchor lending protocol. After Terra’s algorithmic stablecoin UST and its stabilizer token LUNC (then called luna) fell into a death spiral wiping out billions of dollars of investor money, Kujira moved to develop on the Cosmos protocol.

“As we plan to focus on payments and commerce and launch our own high-quality Kujira wallet, we felt that we would have far more flexibility for future integrations if we were able to launch our own native stablecoin,” the announcement said. “We rebuilt Kujira from the ashes of Terra Classic’s collapse. We understand just how important it is to handle a stablecoin correctly by pursuing transparency, community involvement, sustainable governance, while focusing on adoption and tangible value.”

Many stablecoins struggled to keep their price stable in the last months as deleveraging and insolvencies hit crypto markets and blockchain firms. Central banks around the globe have been hiking interest rates to combat surging inflation, drying up liquidity and driving investors to exit riskier investments, including crypto. Read more: What’s the Point of Stablecoins? Understanding Why They Exist

As outlined in the announcement, Kujira has designed USK to maintain its price stability by a combination of overcollateralization and trading incentives. The stablecoin is set to be “soft-pegged” to the U.S. dollar, allowing the exchange rate to deviate within a range versus a hard peg to $1.

Similar to DAI, USK would be overcollateralized by crypto assets, meaning that the stablecoin issuer’s treasury will hold more digital assets in value than the market capitalization of the stablecoin. The backing asset will initially be Cosmos’ native token ATOM, with the team planning to add KUJI – the token issued by Kujira – in the near future, according to the post.

USK tokens can only be minted (created) by locking up crypto such as ATOM as collateral and borrowing USK against them for a 5% interest and a 0.5% minting fee. The fees that USK accrues will be distributed among KUJI token stakers. The interest rate and fee could be subject to change, per the post.

The announcement emphasized that Kujira intends USK to be resistant to censorship. It explained that a key difference from DAI stablecoin was that USK didn’t plan to hold Circle’s stablecoin USDC in its treasury to “avoid being easily censorable.” This line likely reflects yesterday’s news of the U.S. Treasury banning privacy-focused crypto-mixing service Tornado Cash, with Circle subsequently moving quickly to freeze the blacklisted addresses that interacted with the service.

USK starts its test mode Aug. 11, followed by two weeks of feedback before going live.

KUJI has rallied in the wake of the announcement, now up 30% in the last 24 hours and trading higher than before the implosion of Terra in May. Cosmos’ ATOM is down 3.7% on the day in tandem with a general slump in the cryptocurrency market.

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