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Did Terra 'Bet' on Park Heong-joon? Building Busan's Local Currency and Blockchain Ecosystem

[비즈한국] A document alleging that blockchain developer 'Terra' recently held a meeting with Busan Mayor Park Heong-joon is spreading rapidly across various cryptocurrency community sites. The core of the meeting is reportedly the 'signing of an MOU and investment commitment to revitalize the Busan blockchain local economy.' When asked about this, Mayor Park's side stated, "We are in the process of meeting with multiple blockchain development companies and plan to hold full-scale discussions with them now that the term of office has begun."

On the 8th, upon taking office, Mayor Park’s first official act was to sign off on 'Support Measures for Small Business Owners in the COVID-19 Crisis.' Throughout his campaign, he emphasized his commitment to making support for small business owners a priority task for the city government. Among his plans, he intends to expand the issuance of the Busan local currency, 'Dongbaekjeon,' to up to 2 trillion won. He plans to increase the monthly recharge limit to 200,000 won and raise the individual monthly cashback limit from the current 30,000 won to a maximum of 60,000 won.

During his candidacy, Mayor Park announced he would increase municipal budget support from 100 billion won to 200 billion won to fulfill this pledge. However, relying on increased taxes to stimulate business is difficult to defend against criticism that it is merely "fooling people with clever words" (the concept of 'cho-sam-mo-sa'), as the burden could ultimately fall back on citizens. Therefore, Mayor Park also announced that he would pursue restructuring to minimize commissions for local currency operators.

Blockchain experts are paying close attention to this point. Blockchain technology could be used for efficient policy management through tax reduction. Kim Hyung-joong, head of the Cryptocurrency Research Center at Korea University, explained, "If a local currency project is conducted based on blockchain, transaction details are recorded in each block, which reduces the possibility of misuse. This increases the likelihood that local currency will be used where it is truly needed, leading to greater revitalization."

Amidst this, a document detailing a meeting titled 'Signing of an MOU and Investment Commitment to Revitalize the Busan Blockchain Local Economy' has been circulating across multiple cryptocurrency community sites, drawing attention to its authenticity.

According to the document, Busan City plans to utilize Terra's financial protocol to build a blockchain financial ecosystem. It also includes plans to use Terra's stablecoin to offer discount benefits to citizens and reduce commissions for small business owners to boost the usage of Dongbaekjeon. Judging by the timing of the document's spread, it is presumed that the meeting took place before the election.

Terra was co-founded by Daniel Shin, founder of TMON, and Do Kwon. It is a company that develops and provides a blockchain payment system using its own stablecoin, 'Terra.' A stablecoin is a cryptocurrency whose price is pegged to fiat currency or real assets. It features the ability to store value by reducing the price volatility characteristic of cryptocurrencies while maintaining a price equivalent to legal tender.

Because stablecoins are more price-stable than existing cryptocurrencies like Bitcoin, they can implement financial services such as deposits and interest payments using blockchain technology. Existing cryptocurrencies, even when using blockchain technology, have high price volatility, which has limited their realistic application in financial services.

Terra improves existing payment systems through stablecoins to support payments with low commissions. In addition, Terra promotes that it provides constant discount benefits of 5–10% to consumers by utilizing a portion of the seigniorage generated whenever the cryptocurrency is created.

Park Sung-jun, head of the Dongguk University Blockchain Research Center, said, "Existing cryptocurrencies like Bitcoin and Ethereum have high volatility because their prices are determined by the market. That is why issues arise regarding the intrinsic value of these cryptocurrencies. On the other hand, stablecoins are based on legal tender, which solves that problem. Ultimately, trust in the coin increases, allowing payment systems to operate without credit card companies or payment gateways."

In fact, Terra intended to launch an online simple payment service called 'TerraX' in May 2018 based on its technology. However, as there were no clear regulations on cryptocurrency in Korea, Terra entered into a partnership for 'blockchain research and business cooperation' with Chai Corporation in 2019 and is currently collaborating with them. Together, Terra and Chai are conducting R&D projects incorporating blockchain technology, such as △blockchain-based data sharing, △development of products and services using blockchain, and △reducing commissions for small and medium-sized business owners based on blockchain.

Currently, in addition to Chai, Terra provides deposit and lending services for Terra coins through: △'MemePay,' a simple payment service using a stablecoin pegged to the Mongolian fiat currency 'Tugrik (Tg),' and △'Trinito,' a blockchain reward wallet developed by DXM, a subsidiary of Dunamu.

If the meeting contents contained in the document are actually implemented, it is expected that Terra will also achieve its desired objectives. Because a stablecoin is also a currency, its value is maintained only when it is circulated smoothly in the market. In addition, to operate the network smoothly, such as by providing constant discounts to users, they must increase the number of users and the scale of payments.

Nam Doo-wan, the Korea representative of MakerDAO, a leading blockchain-based decentralized finance service provider, stated on his social media, "Busan, the second-largest city in Korea, appears to be using 'Terra' as proposed by the leading mayoral candidate. Congratulations!" adding, "They are competitors, but a win is a win. This will be a very positive signal for the industry, and it is the first time that a public chain stablecoin has received such an opportunity in Korea." However, Nam deleted the post shortly after.

An official from Park’s camp regarding the meeting contents said, "(Besides Terra), we have held meetings with multiple blockchain development companies to revitalize the local currency. However, this was just the first stage of discussion aimed at clarifying the pledges. It is still in the review stage, and now that [Mayor Park] has begun his term, we plan to hold full-scale discussions with the companies."