Terra Luna brings the power of stable cryptocurrency to the mainstream. It’s a project that offers financial payments in digital yet stable cryptocurrencies that can be accepted by leading e-commerce platforms and blockchains.
It has solved the age-old problem of crypto volatility i.e the abrupt fluctuations in prices that made it difficult for the buyers and sellers to accept cryptocurrency as a mode of payment.
The recent launch of Columbus-5 has again proven the project potential. Perhaps, it’s the best time to dig into Terra Luna by exploring its use case and future price prediction. Dial-in Terra –
Checkout the aftermath of LUNA crash and its revival plan
What is Terra?
Terra is a blockchain that was built using COSMOS SDK with a core focus on stablecoins. It is working to make stablecoins (like UST) a mode of payment for day to day transactions. Stablecoins are basically a cryptographic version of fiat currencies (like USD) that are created by blockchains to reduce volatility surrounding crypto assets.
Terra is capable of DAPP creation and smart contract computations
It was founded in the year 2018 by Do Kwon and Daniel Shin from South Korea under Terraform Labs. The aim of the project is to build an efficient financial infrastructure powered by blockchain technology that is transparent, cost-effective and with no hidden fee or charges when it comes to everyday payments.
The blockchain has recorded over 2 million active payment users and over 1 billion annual transactions by volume. CHAI (a leading South Korean mobile payment DAPP) built on Terra, logs over 100K active users per day and use stablecoin KRT (pegged against Korean WON) for payments. Terra has already made its stablecoins live on the leading blockchains like Ethereum (ETH) and Solana Crypto (SOL). It’s on the way to make Terra coins accessible to every known blockchain.
Terra mainnet went live in April 2019
What is Terra LUNA coin?
Luna is the native token of Terra blockchain. Luna powers the Terra ecosystem and helps it function by providing the network with price stability, governance, gas fee and staking, explained below –
The holders of Luna tokens have voting rights which makes them eligible to participate in deciding the future direction of the project. Depending upon the votes, the proposal is approved. This works similar to the Fantom FTM blockchain where FTM token is used for governance.
Luna Staking Rewards:
Luna helps the network by encouraging holders to stake tokens on its network. This in turn benefits Terra by locking in value especially during price fluctuation. The holders should be aware of one thing and that is, by staking LUNA on the blockchain they will be exposing themselves to the volatility risk caused due to change in supply and demand of stablecoins.
The network hedge this risk by offering staking rewards to the users at a decided APY (upto 9%). Validators are the primary recipient of the staking reward followed by the delegators (individual users). Also, an increase in transaction volume on the network increases the share of reward, since a part of the staking reward also comes from the transactions completed on the network.
Higher stake attracts bigger reward
Gas fees are charged by the network. It is primarily done to prevent spam attacks and bot transactions, thus keeping the network secure. Luna token is used to pay the gas fee for every transaction done on the network.
Seigniorage (Luna burn):
When the demand for Terra (Stablecoins) surges. The blockchain will mint more Terra by burning earned Luna tokens. This keeps the price stable and prevents an increase in volatility by matching the pegged Terra value (UST) against the given fiat currency (USD).
The remaining portion of the seigniorage (Luna burn) then goes to the community pool to fund fiscal stimulus (Terra ecosystem). This process is explained in detail in the next section.
Each transaction conducted on the network carries a small percentage of tax fees which are paid to the miners or holders of Luna tokens. Fees default to 0.1% and are capped at 1% (lowest when compared to traditional payment fees).
How does Terra work?
The concept of stable cryptocurrency is derived by following an elastic monetary policy which helps to stabilize the price of Terra stablecoins but this isn’t the only problem to solve. According to the whitepaper, there’s also a need for a better fiscal policy that can drive the adoption of stablecoins by encouraging demand through adoption.
This can be done by encouraging more applications that can opt Terra as a form of payment and rewarding holders with staking rewards that can generate strong returns. It also includes allowing the holders to participate in governance proposals and creating a fiscal ecosystem around stablecoin.
In order to understand price stabilization, we have to understand the relation between Terra stablecoin and LUNA. This can be explained by the following example –
Let’s say we want to mint $100 worth of Terra stablecoin i.e UST. The UST is pegged against the fiat USD at the same value. In order to mint UST, we need to burn the equal monetary value of LUNA and let’s say the price of LUNA is $10 each. Therefore, the blockchain will burn 10 LUNA tokens supplied by us and we receive $100 worth of UST.
In the second instance, if we wish to mint $100 worth of LUNA (10 tokens), we will have to provide $100 worth of UST to the blockchain, which will then burn UST and provide us with 10 LUNA tokens. During the second instance, even if the market price fluctuates, the conversion rate of minting 1 UST is held equivalent to $1. This exchange mechanism plays a crucial role in maintaining the stability in price.
Terra and LUNA works on the analogy of Earth and the Moon
Let’s understand the algorithm in a step-by-step manner –
a) The price of UST falls below $1 to $0.95. 5 cents lower than its pegged value (1 UST= $1)
b) A users or arbitrageur see it as an opportunity to make a profit. He will buy $1000 worth of UST at $0.95 each and then convert it to LUNA (system exchange rate $1UST =$1) by burning UST making a gross profit of $50.
The difference between the minting price and its actual value is called Seigniorage which is $50 in this case
c) Interesting thing happens when UST burn rate increases. Due to UST burn, the supply of UST starts to slow down which causes scarcity and again raise its price back to $1. This will stop the further burning of UST since the profit-taking time is virtually over.
d) The same process repeats when the UST price rise beyond $1. The process will be reversed and in this case, LUNA will be burnt until the price drops back to $1.
Apart from price stability, Terra uses Tendermint (by COSMOS) to reach consensus and reward validators and delegators as part of the PoS protocol.
Watch the video to understand the process –
Terra LUNA Coin ICO:
LUNA never had a public ICO. The private sale of tokens was held in the year 2019 that resulted in raising $72 million by selling tokens at $0.80 each. There will ever be 1 billion LUNA tokens and if the number goes beyond 1 billion, the system will automatically burn the excess token.
The major investors in Terra include Huobi, OKEx, Polychain Capital and Binance. The breakup of token share is shared below –
Terra Major Developments:
Anchor is a fully decentralized fixed income instrument created by the team for earning a stable income on your savings in Terra. The main components of Anchor protocol are Bonded assets (bAssets), Money market, Liquidation contract and Anchor token contract (ANC).
It allows four types of users in its ecosystem: Lenders, Borrowers, Liquidators and ANC liquidity providers. You can read more about them by visiting Anchor.
Mirror Protocol is a complete decentralized finance (DeFi) protocol powered by the smart contract on Terra blockchain. It is created to mimic the price behaviour of the real-world assets on Terra (mAssets). This will allow users from anywhere in the world to actually trade mAssets with real price action without worrying about KYC approval or currency limitations.
The Mirror token (MIR) is used to secure the ecosystem and reward the holders
Terra LUNA Benefits:
It takes just 6 seconds for the blockchain to settle a transaction. Compared to Bitcoin which take 10 minutes on average for settlement. Hence, an edge over other stablecoin projects.
Lowest Transaction Fee:
Compared to the traditional financial payment instruments like credit card which charges nearly 2% per transaction. Terra stablecoin charges approx. 0.6% in transaction fee which is the best alternative when high volume payments are involved.
Accessible on Leading Blockchains:
Terra is expanding its footprints on every known blockchain. It is already live on Solana and Ethereum and have further plans of expansion on Polkadot Crypto DOT and Algorand ALGO. Greater accessibility results in higher adoption.
In order to be accepted and used as a mainstream currency for payments, Terra has to be stable in nature like the current fiat currencies. Thanks to its pricing algorithm, Terra is able to control the crypto price fluctuations and also it is successful in becoming a mode of payment on the leading e-commerce platforms in South Korea.
LUNA Coin Price:
Please check the latest Terra LUNA price, shared below –
Luna Coin Price Prediction:
The world is shifting gear from fiat currencies to decentralized cryptocurrencies. The movement is picking up after the nationwide adoption of Bitcoin as a legal tender in El Salvador. Apart from numerous benefits, cryptocurrencies have their share of drawbacks. The major one is volatility. A high fluctuation in price level exposes the holder to a high risk-reward environment which is quite unstable when it comes to mass adoption (Imagine receiving your payslip and it falls by 30% in value the same day).
Terra has solved this puzzle for cryptocurrencies. With its efficient price algorithm and better reach, it is turning out to be the most admirable stablecoin in the blockchain and the real world. It is already accepted as a mode of payment by some of the leading e-commerce platforms in South Korea.
Thanks to COSMOS Crypto SDK, its integration with the leading blockchains like Ethereum and Solana has made it an accessible and desirable stablecoin. The potential of Terra is beyond imagination. It is on the way of becoming the first usable currency and a stable platform to create dapps and smart contracts that run on stablecoins without worrying about adoption and utility.
The team is genuine and have a lot to offer to the world (majorly in DeFi Space). I won’t be surprised if the coin surpasses $100 mark in the upcoming bull run. It’s the top contender when it comes to mass adoption. The days of decentralization aren’t far and Terra is all set to make its mark.
Where to Buy Terra LUNA Coin?
Terra can be bought from all the leading exchanges like Binance, Coinbase, Poloniex and many more. It can also be bought from Wazirx Exchange which is a subsidiary of Binance in India.
Users have to load money on the respective exchange in order to trade LUNA or any cryptocurrency of their choice.
Is Terra Luna Coin a Good Investment?
Terra is working towards building a solid financial system that starts with Terra stablecoins. Imagine a world where a user doesn’t have to depend on rigid financial system i.e banks or financial institutes to make a trade or purchase digital assets. Moreover, the system is transparent with little to no currency fluctuation.
The project has proven its ability to deploy cryptocurrency as a reliable mode of payment and now it’s working towards building two amazing projects i.e Anchor and Mirror protocols (explained above) which will speed up the adoption rate and completes the Terra ecosystem. It’s not hard to conclude, Terra is here for the long game and anyone who believes in a decentralized economy should take a pie in this project.
This completes my review of Terra LUNA Coin with future price prediction. In the next post, I will cover Monero XMR coin and Enjin Coin Enj . If you’re a fan of blockchain technology then please do share it on your social handles and educate everyone around you. Do remember to subscribe to my YouTube channel for more informative content, released every week.
Cryptocurrency is a highly volatile market. All the information shared in the post is for knowledge purpose only. By no means, it’s financial or investment advice. Readers are responsible for their own investment decisions and should only invest in cryptocurrency after proper research.
An MBA in Marketing. Paras have a decade long experience in the corporate world. He is done with office politics and corporate life, therefore decided to move on and jumped on building Katoch Tubes. He is a crypto fanatic and has the vision to bring cryptocurrency knowledge to every household in the simplest form possible using the power of internet. His area of expertise includes online marketplace, cryptocurrency and content strategy. Reach out to him on Twitter & YouTube.