4 Interesting Features of the Terra (LUNA) Blockchain
Bitcoin might be the most important innovation after the internet, according to Roger Ver.
But what about stablecoins?
If anything, without stablecoins—algorithmic or off-chain—the market would be extremely limited, even illiquid.
After USDT, Bitcoin and crypto took off to present heights.
Looking at Terra and its native coin, LUNA, it is easy to see why it is an instant success.
The investment community can look at the rapid price gains and the over 10X of this year. However, for fundamental investors and those who keep track of critical on-chain metrics, it is the spike in activity that's truly eye-catching.
To understand what's going on with Terra, it is best to understand the basics of the project. This is to break down every component that truly makes Terra great.
But first.
What is Terra?
The project is three years old as of writing, launching in 2018 in South Korea.
Their objective is simple: create a payment platform and interweave it with stablecoins governed by the LUNA coin.
This is a straightforward premise.
And out of simplicity, Terra is blossoming.
Newbies can think of Terra—the blockchain—as a modern eCommerce platform leveraging fiat-pegged stablecoins, especially when it comes to cross-border fund transfer.
Here are some of the platform's defining features:
1. Interoperability, Cost Efficiency, and Speed
As you would expect from a third-generation blockchain with scaling and fees worked out, transacting on the blockchain is cheaper, instantaneous, and frictionless.
The Terra blockchain is also interoperable as it is built based on Cosmos technology.
The aim is to challenge existing centralized payment apps by launching a blockchain-based, comprehensive, and secure end-to-end financial solution circumventing the fragmentation of centralized options.
With a decentralized base layer and a system purposefully designed to bypass needless hoops, Terra is cheaper.
2. Laser Focus on Asian eCommerce Scene
The development path opted by Terra developers is strategic, considering what the developer of the platform wants to achieve.
Terra could be global, but their core is to start by providing a suitable solution for their region.
That's why, as an eCommerce platform roping in the benefits of the blockchain and weaving up with stablecoins—pegged to the USD, Euro, and even JPY--, its creators wanted to grow the Asian eCommerce community.
This is so because the Asian market was desirous of improving the efficiency for payment service providers concurrently increasing the value to customers.
To achieve this, they joined forces with 15 initial partners for a symbiotic alliance. In total, the value of this force had over $25 billion in Gross Market Value with a customer base of over 45 million.
3. Stablecoins and the Terra Station
Terra can build out of this solid partnership to create a cyclic system beneficial for its ecosystem.
For example, the initial 15 eCommerce partners use the Terra stablecoin via the Terra Station—the platform's proprietary wallet. Their stablecoins, unlike off-chain options, are algorithmic.
This means that the peg is controlled by smart contracts running on the public ledger and governed by the LUNA coin.
The objective of stablecoins is to reduce price volatility across supported fiat currencies. Terra stablecoins include assets tracking the USD, CNY, JPY, KRW, GBP, Euro, and the IMF's Special Drawing Rights (SDR).
Terra partners have to choose which to deploy, depending on the marketplace. LUNA serves a dual role as a governance and utility token.
The borrower of the last resort is helping as part of the system's stablecoin collateralization mechanism.
4. Anchor and Mirror Protocols
As a simplification, the Anchor protocol is designed to incentivize a low-volatility saving mechanism based entirely on Terra stablecoins.
The goal is to enable Terra stablecoin holders to earn just like they would if they had deposited in a traditional bank complete with instant withdrawals.
The difference between Anchor Protocol and other money markets is that the supply of other Proof-of-Stake blockchains' rewards determines its saving rate.
Additionally, Anchor is a lending protocol, allowing users to secure loans by staking liquid-staked PoS assets from other blockchains.
On the other hand, the Mirror protocol acts as a DeFi protocol on the Terra blockchain allowing for the creation of simulated assets—that is, synthetics. All assets created on the Mirror protocols are fungible.
The Terra Station (wallet) supports all Anchor and Mirror Protocol assets.
At the time of writing, LUNA is trading at $38.
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Terra Luna looks like a nice project. I think the most important thing is efficiency. If the system is efficient enough, it will be excellent. Every day the volume is increasing and the need for stable coins is increasing more and more.
Thanks for the nice article and research. He gave me an idea.
I only knew Terra as a stable coin before, but When I read your article, I realized that it is a great project and I will follow their projects closely.