Yesterday, we had a 45-minute chat with Do Kwon from Terra Money about the state of their stablecoin and payments network on the Chorus One Telegram. Key topics discussed include adoption, the regulatory situation, what the Terra team is currently working on, the relationship to the Cosmos ecosystem, use cases for Terra aside from payments, and upcoming milestones. What follows is a cleaned up transcript of the AMA.

Intro to Do Kwon and High-Level Overview of Terra:

Hello! I am Do Kwon, and I am a co-founder at Terra. Before Terra I was building technologies to connect user devices over Wifi mesh networks to extend last mile internet connectivity, and prior to that I was a NLP engineer at Microsoft.

I got into crypto in 2017 by randomly joining a chat room with friends reading white papers and looking at projects and got hooked from an academic perspective.

Terra is lots of things at this point, but to give a quick overview: Terra is designing a blockchain-based payment system that is powered by a price-stable cryptocurrency. Terra is working closely with global e-commerce platforms across Asia to drive mass adoption. To date, Terra has 15 genesis partners that drive $50 billion in annual transaction volume. About a month ago, Chai payment app launched on Terra protocol and is seeing strong growth of 667% in transaction volume with 300k+ signed users (74% women) in two ecommerce platforms.

Before you guys started Terra, did you also look at other blockchain use cases? What were the main arguments that made Terra win out over alternatives?

Sure. So we thought lots of technologies being built in the Cryptoverse were super interesting, but it didn't seem like they would ever see the light of day unless the basic use cases of crypto (like payments) are in the hands of more people. At the end of the day, it doesn’t matter how cool Monero is if your convenience store won’t take it, and their call centers don’t like to argue with you.

When we looked at previous "stepwise improvements" in the history of internet payments, it was always bootstrapped by payments players partnering with applications with large user bases. Paypal got its start by piggybacking off of ebay, and Alipay Taobao. Today these platforms do 500 billion and 4 trillion USD annually in payments transactions.

These are some amazing growth and adoption numbers. As many know, Terra is built using the Cosmos SDK and Tendermint. Do you mind telling us a bit about how the technology stack performs in such an environment and what problems you encountered?

Sure. So working with the Tendermint and SDK tech stacks has been a wonderful experience, and seeing how it has evolved from (I think we first started development when SDK was at v0.26 - now its v0.36) when we started to now has been a rare privilege. I think Terra is helping to test the limits of the SDK given we have probably the most amount of transactions and active wallets, and we are starting to see some interesting quirks

For example, the light client daemon frequently goes down because it tries to open too many intermediary files when you try to query lots of previous transactions and even when it doesn’t go down can take 10 seconds or more to return a response.

How do you see the Terra and Cosmos ecosystem supporting each other? What extensions of the SDK is the Terra team interested in or working on?

All the features we support (like swaps, price oracles) follow the convention of modules in the SDK. We think the oracle module especially can be cross applied for a lot of other use cases besides just stablecoins, as it is just a generalized interface to bring real world data on-chain. I know the Cosmos team has a plan to build an npm or dockerhub like repository listing interesting modules, and we definitely want to keep contributing to that. Other than that we are strong supporters of the Cosmos/Tendermint vision and will continue to help out in whatever way we can to help it succeed.

Some of the new tech being developed by Cosmos is very interesting to us. We are especially interested in subkey technology, where subkeys are given conditional rights to an account, because this is something that we can apply to Chai immediately (e.g. give a payment wallet a max cap in the amount of withdrawals).

In the long run, do you see Terra being more of a settlement network or do you expect that most payments will continue to happen on-chain?

I think we will continue to see transactions on-chain. Large parts of why eCommerce companies had to be large operations is because of settlements & payments - think if we are successful you will start to see verticalized C2C or open markets that are kept headcount-small thanks to an efficient stablecoin payments & settlements infrastructure.

I have heard both descriptions of Terra as a decentralized central bank and as a payments network. Do you think payments will remain the primary focus of the network? Or are there other use cases beyond payments that Terra could naturally evolve to cover?

Great question. We are already starting to see non-payments use cases for Terra. Just recently the KRW started to depreciate rapidly against the USD due to trade tensions with China and Japan. We've seen lots of people buy TerraKRW from exchanges and swap out to TerraSDR or TerraUSD to hedge against this FX risk. We think use cases like this will evolve and become more popular over time. Capital controls and currency depreciation is a big problem in Asia and if people can find a non-volatile way to keep their wealth secure, they will take it.

We think though a large payments network is needed to make a lot of banking features useful. For example, if Terra is not widely used and transacted, building a payroll feature will simply result in employees selling Terra immediately as soon as they receive it, which defeats the purpose of having the HR tool in the first place. Same for lending, etc.

We are currently developing Tank; Tank is supposed to be our banking app, and we want to eventually include sophisticated features like paying bills, processing payroll, etc. But in version one it will include the ability to

  1. store Terra stablecoins,
  2. earn interest on deposits by partnering with third part DeFi providers (e.g. Nexo)
  3. allow users to swap stablecoins with one another to hedge fx risk (thinking of adding a fx bot feature to keep swapping currencies for the user)

Since Facebook’s Libra raised much attention from regulators all around the world about blockchain, especially stablecoins, so how is Terra dealing with regulators? And according to what I have known, Terra planned to issue stablecoin in three different countries (South Korea, Singapore and Mongolia). Could you briefly introduce the regulator’s attitude to blockchain in these countries?

Sure, so we spend a lot of time thinking about regulations and talking to regulators, so giving a detailed overview is probably difficult here.

In Korea, Chai holds the digital payments and e-money licenses; this means that we have the ability to issue "points" that are recognized by the state and can be converted to fiat. We are the 44th firm in the country to have gotten this and the first blockchain firm ever.

These licenses are important in the sense that Terra can have unparallelled access to fiat off-ramp infrastructure. Today, we have PISP agreements with 13 of the 15 commercial banks in the country, which means that Chai can programmatically withdraw fiat from the users bank account to purchase KRT in the backend

Mongolia is an interesting case - we have a joint venture with the sitting president's daughter & son in law. This JV will issue TerraMND around the end of the year, and TerraMND will be accepted by the government for taxes and key utility bills. This would make TerraMND a sovereign cryptocurrency:

Will it be possible for people to directly send KRT from Chai to a Terra address or vice versa, in the future?

I think we will build this sometime this year! We just need to partner with popular wallet options in our key markets.

At the moment, what is the biggest bottleneck for Terra's growth? What are you struggling with the most?

Right now lots of things are going super well. I am struggling to bridge the gap between Terra working with very traditional businesses (banks, retail commerce) and building a decentralized ecosystem. There are strong differences in opinion on both sides.

What are the biggest differences in opinion between these two?

For example, our validators recently started something called Project Santa, which is an initiative for validators to subsidize staking while the network is not mature yet. In the PoS world 10% annualized returns are average (probably because they are denominated in volatile coins) while the non-crypto partners thought those were quite outrageous returns (comparing against bonds and equities). On the other side, we sometimes have partners confused that Terraform Labs doesn't insure the redeemable value of KRT.

What are the biggest milestones for Terra in the next 24 months?

  1. For Chai, we want to get to a tx volume run rate that is in the billions (USD) by the end of the year and more than 10 million active wallets by the end of next. We are quite confident we can get there. In Korea we will "close the retail loop" by inviting foreign guests to try to get by in a weekend visit in Korea by just holding KRT in Chai. Wonder how that will turn out.
  2. We also hope to launch in Mongolia and Singapore by the end of the year. Small markets, but extremely symbolic as the former provides a solid blueprint for a sovereign stablecoin and the latter regulatory signaling for the rest of SE Asia.
  3. On-chain side, we would like toolsets for our validators and community to understand key macroeconomic variables in the Terra economy, and vote on how key levers should be changed like the tx fee rate. This, I hope, will start to resemble a "decentralized federal reserve" where the validator set forms sovereign governance over Terra monies.