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What is Terra (LUNA)?DownloadSubscribe
What is Terra (LUNA)?

What is Terra (LUNA)?

For fans of decentralized currencies, what could be better than a blockchain controlled by smart contracts that are designed to stabilize crypto prices, reduce or prevent price volatility, create opportunities for token holders to earn great profits, and ensure that transactions are fast and cheap?

These qualities are hallmarks that perfectly define the Terra blockchain, and go some way to explaining why this project has been drawing the attention of crypto enthusiasts right across the space.

Terra also has a growing ecosystem of decentralized applications with some pretty interesting use cases. Join us for a voyage to the heart of Terra LUNA.


    What is Terra and LUNA token?

    Terra, a blockchain network that was founded in January 2018 by Korean company “Terraform Labs”, empowers the Terra LUNA crypto to adjust and stabilize the prices of Terra’s stablecoins whenever they rise above or fall below their respective “pegged prices”.

    It launched Terra LUNA coin in July 2019 and houses it along with other stablecoins such as TerraUSD (also called UST), TerraGBP, TerraEUR, TerraCNY, etc.

    The exchange rate between 1 UST and 1 USD dollar is fixed or pegged at 1 UST = $1, and each unit of LUNA is valued at $1, and can be swapped for 1 UST. Terra's stablecoins are designed to stay at the same price regardless of current supply and demand in the market.

    If, for example, there was such high demand for UST that its price increased to $1.5—when it is expected to remain at the $1 pegged price—then Terra would counteract the demand and reduce the price by increasing UST supply and allowing token holders to swap their LUNA for UST. Swapping LUNA for UST would increase UST token supply and eventually cause UST price to decrease back to the $1 pegged price.

    If the UST price fell below $1, the same mechanism would happen, but in reverse. This all ensures that Terra's stablecoins can remain stable without the need of any centralized committee or interference.

    As stablecoin usage on Terra increases, users who stake Terra's native LUNA token receive more fees. LUNA is a non-inflationary currency, meaning the supply is not increasing, and considering that the LUNA token is also needed for minting stablecoins, this probably explains why increased usage of the Terra blockchain equates to an increasing token price for LUNA, which outperformed many assets in 2021.


    dApps that are built on Terra


    Anchor

    Anchor is a protocol that enables Terra to provide users with savings accounts, lending opportunities, instant deposit/withdrawal options, opportunities to earn interests on crypto, and incentives or block rewards (for PoS: Proof of Stake) for mining tokens and validating blocks. One of the most disruptive features of Anchor is the aim of providing users with a fixed interest rate of 20% on their crypto savings, which is novel in a space dominated by variable savings accounts that are affected by market volatility.

    Mirror

    Mirror empowers Terra to create mirrored assets (MAssets) which are a wealth of information and useful representations or models for the exact characteristics of real-world assets. Mirror gives traders around the world direct access to the behavior and prices of assets represented by stablecoin tokens. At the time of writing there is 1.66 billion UST worth of value locked in the Mirror protocol, making it competitive with Ethereum's Synthetix platform, which launched a full 3 years prior to Mirror.

    Wormhole

    Wormhole acts as a bridge between Terra and other blockchains or decentralized finance (DeFi) networks and provides users with a unified interface through which they can exchange crypto asset values between Terra network and multiple DeFi networks.

    Terraswap

    Terraswap enables Terra blockchain to have user transactions or on-chain exchanges for stablecoin assets, and acts as a doorway to Terra’s financial marketplace which it keeps open to interested individuals.

    Pylon

    Pylon is a payment and saving platform built on Terra to provide savings products, opportunities from deposits, and a collection of decentralized finance payments that are structured on interest-bearing protocols such as Anchor.


    Future prospects of Terra

    According to Asia Markets, Terra project co-founder, Do Kwon, stated that more than 60 projects are preparing to launch between 6 and 8 weeks after October 2021, and more than 100 other projects have declared plans for the end of this year or early 2022.

    With the big mark it has made, and in the midst of many promising projects it has in the tank, one would hardly disagree that Terra’s future prospects are big and bright in the community of decentralized financial institutions that are gaining more patronage than governments’ centralized financial institutions.

    But if governments launch their own cryptocurrencies, as is being widely reported, then one would need to bear in mind that stablecoins like the Terra tokens may face some restrictions in certain parts of the world, and this could reduce or halt the prospects of Terra project in the future. Indeed, documentation shows that Terra CEO Do Kwon, a resident of South Korea, was served with a subpoena at the Messari crypto conference which took place in New York in September 2021.

    However, it’s also important to bear in mind that if any government launches a centralized cryptocurrency, it may still face stiff competition from fully decentralized financial institutions like Terra which—in terms of providing highly rewarding financial services—has been vastly outperforming many government-controlled centralized financial institutions.

    This content is for informational purposes only and is not investment advice. You should consult a qualified licensed advisor before engaging in any transaction.

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