Introduction to Terra LUNA cryptocurrency

The blockchain industry grows with both established assets gaining more support from traders and investors alike. New companies also join the crypto economy, bringing new ideas and expanding cryptocurrencies’ useability. One such use is to track assets spending, saving, and exchanging which the Terra blockchain enables. 

Terra builds upon existing technologies to create tools to help traders maximise profit from their investments. Thus, it serves as a tool that helps other cryptocurrencies rather than challenge an already existing market. Here’s what else you need to know about Terra and its native currency, LUNA. 

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Identifying the platform and the cryptocurrency

The most common mistake new traders make is mistaking the name of the cryptocurrency for the name of the blockchain. In this case, the network is Terra while LUNA is its native digital asset. Thus, market graphs showing the dip and rise in Terra LUNA recovery is referring to the prices bought and sold for the latter. 

Terra, the open-source blockchain payment platform

Terra is a payment system founded in 2018 in South Korea by Terraform Labs. Its founders Do Kwon and Daniel Shin co-authored the blockchain’s white paper published in April 2019. The core idea for Terra is to become a platform for traders combining the price-stability of fiat and growth of Bitcoin (BTC).  

The word ‘Terra’ also serves another meaning exclusively within its blockchain called ‘Terra stablecoins’. These are digital assets pegged to fiat currencies where each one is named after. If the Terra stablecoin says TerraJPY, for example, then it tracks the current value of Japanese yen (JPY), including its inflation rate. 

Expansion and contraction of the Terra Pool

All Terra stablecoin can be influenced by the law of supply and demand. Generating too much or too little of any asset can throw off calculations, steering the asset away from the value of the fiat it is pegged to. The blockchain counters this through expansion and contraction of the Terra Pool. 

The Terra Pool refers to the collection of stablecoins in its network and their respective supply. If the supply is too small, then the pool needs to expand by minting more Terra and burning LUNA. Contraction does the opposite (mint LUNA and burn Terra) which happens when the pool is too big. 

LUNA, Terra-based crypto for blockchain governance

LUNA is the volatile counterweight to Terra stablecoins and is the main native crypto for the blockchain. It is this asset that is given to the network’s delegators as incentive. LUNA can be traded for fiat and other crypto at exchanges, allowing it to work at the same fundamentals as Ethereum (ETH). 

Also another feature it has in common with the second-most valuable digital asset is how it can be used on blockchain governance among its investors. As for applications outside of its blockchain, LUNA is not typically accepted as a mode of payment but it can be swapped for other crypto. You can use your Terra LUNA investments to earn ETH which you can use to bet on casino games at Gamdom.

What is blockchain governance?

Governing a blockchain is done primarily through voting. Terra LUNA holders can stake their assets to give prestige on a particular vote or nudge the community discussion in a certain direction. Most topics discussed in such matters were future plans for the network. When the blockchain is experiencing a crisis, investors stake on addressing the question ‘how can LUNA recover?’. 

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Incentives for validators and delegators

Terra is designed after the original Ethereum mainnet, adopting its original proof-of-work (PoW) system to give the network the processing power it needs to run. The miners are called ‘validators’ and their duty is to provide a node that can validate every transaction and user involved. Supporting them in their duties are ‘delegators’ who give them LUNA in exchange for a fraction of the earnings. They are paid in two kinds of incentives:

• Gas fees - The cost of processing a transaction request
• Stability fees - Percentage added to swaps involving Terra LUNA cryptocurrency
   

What happened to Terra (LUNA)?

One important topic to address is the future of Terra LUNA. The network is currently experiencing a major crash, resulting in investors losing confidence in its services. Terra is an open-source and decentralised platform relying only on an algorithm. However, this system failed to maintain the proper price of TerraUSD (UST), causing it to crash. 

LUNA was also affected because of its expansion and contraction system, dropping both crypto selling prices rapidly. To answer ‘what happened to LUNA?’ for those who tried searching for it, many major exchanges have already delisted the asset. Is it possible for LUNA to recover? Yes, within the foreseeable future but at a slow pace. 

Can LUNA recover? A few believe that it can still make a comeback with the asset possibly recovering at least $100 in 2023. CoinMarketCap ranks it at #125 and the asset still has a $202,900,000 market cap. Terra LUNA recovery plan considers a few ideas, the most discussed of which is foregoing the Terra stablecoin. This is called Terra LUNA’s Revival Plan 2.0 which includes the following outlines:

• A new blockchain
  • A new Terra blockchain solely relying on LUNA Coin Recovery. It will no longer have the stablecoins that caused the assets’ crash in the first place.
• A new distribution mechanism
  • The new LUNA tokens are airdropped to all those who staked on Terra stablecoins and LUNA classic. This is free for everyone eligible.
• A token reset
  • The current circulation of LUNA is reset to 1 billion. Assets that were not claimed will be added to the circulation via incentives.
     

Does LUNA have a future? Many believe that it is possible. Terra LUNA recovery chances are good enough to keep it stable but nobody is confident that it will be profitable until 2025. Founders are focused on regaining lost trust to create a solid foundation for the crypto. Whether or not can LUNA come back depends on how many traders wish to participate in this active effort from Terra labs. Crypto traders are looking forward to seeing LUNA back on major exchanges, which can help the economy's growth.

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Words: Clarence Clarke