Bitcoin — the first cryptocurrency — was created for people to make peer-to-peer transactions. The digital currency was intended to provide the world with a payment system free from third-party control. But due to the market volatility and unusual price fluctuation, cryptocurrencies that weren’t volatile were the stablecoins pegged to the US dollars so they wouldn’t go over the price of $1. Then this is where Terra comes in with their stable coin UST.
About the Terra Network
The Terra blockchain was created by co-founders Daniel Shin and Do Kwon in 2018. They made the project as a way to drive the adoption of blockchain technology while focusing on price stability and usability. Terra is a Proof-of-Stake (PoS) Blockchain network on which decentralized apps (dApps) run and, more importantly, a stable coin backed by the native coin LUNA. The goal of Terra is to maximize the potential of blockchain technology and make a fully decentralized payment system. It has low transaction fees and payment channels in its ecosystem.
The Network’s Tokens
Within the terra network, there are two main tokens: LUNA and Terra (UST)
What is LUNA crypto coin?
LUNA—the native token of Terra network—stabilizes currencies worldwide, but the main one is UST since the US dollar is widely used. The LUNA coin can exist in three different forms.
- Unbonded: You have coins that can be freely used to transact. You can do anything with unbonded LUNA since you own the coins.
- Bonded: It is staked LUNA. With staked LUNA, your coins generate rewards for the validators and delegators to which it is bonded. If you are staking luna, you can’t trade freely as it is locked into the ecosystem until you unbond it.
- Unbonding: This is a 21-day period when LUNA is unstaking. You will not get any staking reward. You can’t trade within the period. Once it’s over, you will have your LUNA back to its unbonded state. Luna crypto coin’s supply serves as a support for UST absorbing fluctuations and demands by controlling supply.
What is Terra Token?
UST is Terra’s most important product, and it allows for a truly decentralized currency system. Terra is a decentralized algorithmic Stablecoins that is pegged to the value of various major currencies like USD (TerraUSD), GBR (TerraGBR), KRW (TerraKRW), JPY (TerraJPY), CNY (TerraCNY), etc.
How Does Terra Work?
The inner workings of Terra make sure that the supply of UST does not go above the $1 margin. Anyone with a LUNA token can be swapped for UST and make a profit when they sell for more than one dollar. This stabilizes the supply of UST and makes LUNA more scarce and valuable.
LUNA’s Burning Mechanism
UST uses an automated system of burning and minting, which is a process called seigniorage. UST is printed when a certain percentage of LUNA is burned, and the rest is sent to the community pool. The coins that are not burnt are reinvested in the future.
Also, Terra has a total supply of 1 billion LUNA tokens, and if the number is ever exceeded, Luna is burned until it returns to a balanced supply level. This gives LUNA crypto coins huge potential, especially if held long-term instead of being sold. However, since it gets burnt over time, LUNA becomes more scarce, and the price should go up with demand.
The Terra Ecosystem
The Terra ecosystem comprises various apps, some of which are shown below.
It is a mobile payment app powered by the Terra blockchain network. It is widely used in South Korea with millions of users. CHAI is used for seamless payment across the internet via blockchain technology. It Is like the blockchain version of PayPal and can be used to make transactions with UST.
It is a yield platform which works like a bank. Users can earn a yield by taking out loans and depositing funds. Stakers receive interest based on borrowers and interest rates in exchange for their lending services. The more funds they stake, the more reward they could receive in interest.
With over 10 billion UST in total value locked (TVL), increased savings has no minimum deposits, account freezes, or sign up requirements. The rate on staking UST on Anchor is about 20% APY. So you can deposit your stable coin and earn a 20% interest rate like a regular savings account.
Mirror is a synthetic derivatives system that was just launched recently. Holders of MIR—the protocol’s governance token—are in charge of all code updates and on-chain treasury governance.
Columbia-5 Upgrade Terra’s Ecosystem
Labeled as a game-changer by many, the Columbus-5 consists of the following 4 upgrades.
In the past, a portion of the seigniorage LUNA was gathered into a community pool, where it is turned into rewards. However, Columbus-5 introduced the burning of all luna tokens used to mint UST, meaning that with every UST minted for stabilization, all the LUNA tokens are burnt and not a portion of it. It will allow LUNA to become deflationary and increase returns for LUNA’s delegators.
It enables Internet Blockchain Communication (IBC) which allows smart contracts to be run across the Cosmos chain. It will enable more application launches on the terra network and increase UST adoption in different zones. As a result, more liquidity flows into the terra ecosystem, raising the value of the network. Furthermore, it allows the bridging of assets and data sharing between Terra and other IBC protocols like Osmosis, Akash, Secret network, Cosmos hub, and others.
The ozone protocol allows for the insurance of technical protocol that covers risks, further enhancing the growth and safety of the Terra DeFi ecosystem.
Wormhole bridges a connection between Terra and Solana, allowing more adoption across the crypto space. In addition, the wormhole will enable UST to be seamlessly ported to the Solana network. Given how well Solana is doing, this is expected to expand UST adoption and growth even further. These changes help improve the value of scalability and abilities of the Terra ecosystem.
Terra has a supply of 1 billion tokens. If this number is exceeded, LUNA is burned until it returns to the equilibrium supply level. New LUNA tokens are minted through the protocol’s algorithm, as needed, to maintain the price of Terra stablecoins. LUNA was first made available for purchase in a private token sale that concluded in August 2018, and as a result, Terra raised $32 million. Of the 385,245,974 LUNA minted for sale,
- 10% was reserved for Terraform Labs,
- 20% for employees and project contributors,
- 20% for the Terra Alliance,
- 20% for price stability reserves,
- 26% for project backers,
- 4% for genesis liquidity.
LUNA Token. There is currently a circulating supply of 354,866,237.89 LUNA. It is #9 on the chart, with a market capitalization of $35,403,536,889. Terra USD Coin. The circulating supply of UST is 16.73B UST. It has market capitalization of $16,736,097,925 and charts at #14.
Terra coming soon on Guarda
Terra has become one of the most talked about blockchain networks from being an unknown network. Terra is a potential blockchain network among crypto enthusiasts in the ever developing world of crypto. The Blockchain introduces a comprehensive support system in which each protocol is a component of a greater puzzle. It also invests in dApps to increase user growth and mass adoption. Stay tuned for when it’ll be available for management on Guarda.