|Pic credit: The Daily Hodl|
In less than a year, Luna has amassed more than 100Xd. Is it too late to join this project, or is there still time? With the exception of LUNA, every top 10 cryptocurrencies have suffered a price drop recently. The native token of the Terra protocol has been catching fire.
A brief history of Terra
Now, let me tell you a brief history of Terra. Terra is one of the first blockchain networks that offer completely algorithmic stablecoins designed specifically for e-commerce. There are a Layer One Blockchain and Smart Contract Programmable.
It’s similar to a computerized Federal Reserve. As an example, consider a robot Jerome Powell. Jerome, the robot, has been preprogrammed to carry out specified acts in order to regulate and impact prices. If Robot Jerome detects a lack of currency, he automatically corrects the situation.
How is this different from most other stablecoins?
Terra stablecoins are based on a two-token seigniorage model, which is a fancy way of saying that prices are kept stable by limiting the number of coins in circulation. The supply is raised when the coin price is above the peg, and it is dropped when the price is below the peg.
Terra offers a variety of stablecoins, but UST is the most valuable, both in terms of market capitalization and total value locked, with a market capitalization of $9 billion. An equivalent amount of LUNA must be burned to mint UST or any other Terra stablecoin.
For a variety of reasons, UST is becoming increasingly popular. First, the Anchor protocol allows you to earn over 20% APY on this cryptocurrency.
Second, Tether’s antics are starting to annoy people’s nerves. Tether, the world’s largest stablecoin, has been dogged by controversy for years, with claims that it has sufficient assets to back its stablecoin.
Tera is more decentralized than Tether because it does not require a central body to confirm its legitimacy. Smart contracts play a part in its operation. For people who are tired of trusting humans to do the right thing, UST offers a distinct value proposition.
Despite the existence of Terraform Labs, the corporation behind Terra, as well as the founder of Terra, has committed to entirely eliminating Terraform Labs if authorities pursue them, making it fully decentralized. As far as I can tell, this would make UST resistant to regulators, making it a real decentralized stablecoin.
Risks of decentralization
There are incentives for burning Terra and UST to keep the price at $1, but if they don’t work, UST could lose its value. This occurred in May, when a large number of people switched from stablecoins to LUNA, while at the same time, the value of LUNA was falling as people sold during the crash. This is a disaster. Nothing will frighten a trader more than watching their stablecoin trade for less than a dollar.
This forced Terra to create Proposition 90, as well as a slew of other upgrades aimed at resolving the problem. In September, the Columbus-5 update was released. Previously, when LUNA was burned to mint UST, a small amount of the proceeds went to a community pool to fund new Terra initiatives.
his was removed in the first upgrade, and now when LUNA is minted for UST, 100% of it is burned. This helps to make LUNA a more deflationary token, implying that the token will face more upward price pressure.
Then there’s Ozone Insurance 2.1, which is essentially a safety net for individuals who own UST in case it goes off the rails. Then came the premiere of Stargate. Stargate opened the floodgates of interoperability for UST and other Terra assets, implying that Terra can now be used across several blockchains. This aids in attracting a large number of users.
Terra’s transaction per the second throughput was also enhanced by 10 to 30 times thanks to Stargate. Finally, considerable stake yield improvements of up to 79 percent were seen with Columbus-5. The goal was to raise the number of LUNA staked as well as the demand for the LUNA token, which appears to be working given the current price movement. But Terra’s overarching goal is to be a global payment and e-commerce platform.
Programs running on the Terra blockchain at this moment.
This is significant because the more valuable programs developed on Terra, the higher the Luna token’s price will rise. Mirror is a DeFi system based on smart contracts that allow users to create synthetic assets known as Mirror assets.
As an example, these well-known stocks are mirrored to their actual share price. And this is an intriguing use case for cryptocurrency, particularly for folks who live in a nation with trading limitations and wish to acquire stock.
They don’t need approval from a central body to purchase these mirrored assets. However, I’m curious as to how this will play out in court. On top of that, we have the Anchor protocol, which, as I previously stated, provides a yield of approximately 20% on UST. That’s nearly 400 times more than the average bank savings account yields.
Anchor protocol’s total value locked has risen dramatically, and it is now worth $10.6 billion, more than double what it was at the beginning of October.
Terra’s Blockchain is used to run CHAI, a payment network. Considering that it was formed by Daniel Shin, one of LUNA’s two co-founders, this makes perfect sense. TMON, an e-commerce platform with 10 million members, currently has CHAI available.
Behind the scenes, CHAI generates and controls a Terra wallet for the customer. The front-end interface does not actually reveal crypto information, making it as easy to use as PayPal. Merchants pay a much smaller cost than they would if they used a credit or debit card, with a processing rate of 0.05 percent compared to the usual 2-3 percent.
This app appears to be the future of blockchain technology. I believe that for true crypto acceptance to occur, individuals must be able to utilize it without even realizing it. To buy something using crypto, a customer shouldn’t need to know what a hash rate is or what Byzantine Fault Tolerance is.
Some other events contributing to LUNA’s upwards price performance
Terra has approved two proposals that would burn $4.5 billion in LUNA from community pools. Every 800 blocks generated, a burn will occur. When the voting took place, 89 million tokens were destroyed at first, and the price of LUNA skyrocketed from $50 to $54 in an instant.
This is one of the largest Layer-1 asset burning ever seen in the crypto market. Hundreds more dApps were also waiting for the upgrade before launching with the introduction of Columbus-5, and upgrades are finally happening. This involves the launch of Astroport, an AMM decentralized exchange, which is significant.
|pic credit: Defi Llama|
Astroport began on December 14 with an incentive for customers to lock up their LUNA in exchange for ASTRO tokens, which were airdropped. Astroport currently has $1.28 billion in total value locked, with LUNA accounting for more than half of the amount, according to DeFi Llama.
Then there are NFTs. The Terra Ecosystem has released its inaugural NFT collection, demonstrating that there is much to be thrilled about in the Terra LUNA world.
Is LUNA a good investment now
In the long run, I believe LUNA will continue to rise. However, I intend to exercise extreme caution while trading around all-time highs. I believe that the secret to winning the crypto game is patience.
Assume you have $1,000 to put into LUNA. Instead of investing $1,000 all at once, consider contributing $100 per week for ten weeks to help lessen volatility risk.
Will Terra Luna beat Ethereum
Well, I’m not a fan of direct price predictions. I’ve seen on Twitter a $1,000 price prediction for LUNA, meaning it would more than 10X compete in size with Ethereum. Given how unique the ecosystem is with not only being a layer-1 blockchain but also being a global e-commerce platform, I could see this potentially happening at some point in the future, but I would never bank on that kind of price action in the short run. If this is the Ethereum killer, it will take time.