Many networks are now attempting to stabilize stablecoin through various techniques. Terra is one of the initiatives that has created a unique infrastructure for stablecoin transactions in South Korea, which has shown to be quite efficient.
Today, Bitkub Academy will show you about Terra, what it is, who are the developers, and what are some of the highlights and noteworthy pieces of work?
What is Terra (LUNA)?
Terra is a South Korean platform that enables fully integrated open-source blockchain payments by creating stablecoins priced in fiat currencies or government-issued currencies such as the South Korean won or the US dollar via the use of smart contracts.
What exactly are the Terra and LUNA tokens?
Terra and LUNA are the two main coins on the Terra Protocol platform.
Terra is a stablecoin or fixed-value coin that is denominated in fiat currency and is named after the quotation currency; for example, Terra's first coin was TerraKRW (KRT), which was denominated in South Korean won. Additionally, there are other coins available, including TerraUSD (UST), TerraJPY, TerraCNY, TerraEUR, TerraGBP, and TerraSDR.
LUNA is the Terra Protocol platform coin that is utilized to maintain price stability. It also serves as a guarantee for the creation of stablecoins and serves as a governance token, with holders voting on project development ideas. Furthermore, users can stake LUNA on the platform to receive a fee discount.
Terra and LUNA tokens act as stabilizers for each other. To obtain a single coin, you must first destroy the other coin in order to maintain a consistent price. Thus, the terms Terra and LUNA relate to the gravitational attraction between the earth and the moon.
Terra was founded in 2018 by Do Kwon and Daniel Shin in South Korea. Kwon formerly worked as a software engineer at Microsoft and Apple before founding and leading Anyfi, a start-up that provides decentralized wireless networking services. Shin co-founded and served as president and CEO of Chai, an Asian payment technology business. Additionally, he founded the South Korean e-commerce or Ticket Monster (TMON).
The initiative began with a $32 million investment from four major investors: Binance Labs, OKEx, Huobi Capital, and Dunamu & Partners which is the investment arm of Upbit, a Seoul-based cryptocurrency exchange. Later in 2019, Terra released its mainnet, or fully functional blockchain.
The development team's major goal was to establish a stable and cost-effective Terra by merging the notion of cryptocurrencies with fiat and Bitcoin and utilizing them as a medium of exchange to maximize their utility. The development team believes that Terra protocol will be a good system and the greatest digital currency available today, as an economy requires a protocol that can maintain a very stable pricing.
Terra's key strength is that it can efficiently fix the stablecoin price, which links its value to other fiat currencies. It is also equipped to handle rapid payments and minimal fees owing to the speed of building a new block, which takes only 6-8 seconds.
Terra's fiat currencies include the Won, Yuan, Yen, Tugrik, and Thai baht (also known as THT). Terra also offers the above countries exclusive international funds withdrawal privileges. Reflecting closely, there are quite a few stablecoins now and most of them are linked to the US dollar. As a result, Terra has substantially eased the usage of borderless payment systems with other currencies.
Stablecoin must maintain its price stability by tying it to an asset. To minimize price volatility, the protocol must maintain the Terra token's price by balancing supply and demand. When consumers wish to pay for products and services, they must first generate or mint the Terra coin by burning the requisite quantity of LUNA before acquiring Terra to spend.
The aforementioned process leads to an additional feature in which users can speculate between LUNA and stablecoins, incentivizing price balancing in the event that the coin price varies. Furthermore, it is simple for coins to revert to their original value. This is advantageous for both retailers and sellers that use stablecoins.
UST coins, for example, are US dollar stablecoins. The price rose to $1.05 due to high demand, despite the fact that it was only supposed to be $1. As a result, Terra must expand the amount of UST tokens by encouraging LUNA token holders to trade their tokens for UST, where 1 LUNA equals $1 when exchanged. Investors may resell UST for $1.05, a 5% return. In contrast, when stablecoin demand is low, coin holders can benefit by converting stablecoin to LUNA. This limits the quantity of stablecoins and drives the price higher.
Another feature of Terra is its Terra Bridge, which permits cross-chain transfers of assets such as Terra, Binance Smart Chain, Ethereum, and other Terra protocols, while also spreading its functionality in many other projects like DeFi, Web 3.0, and NFT:
Chai: An e-commerce payment application utilized by over 2 million South Koreans each year, with an annual spending of over $1 billion. It uses Terra's blockchain network, which charges 0.1-1 percent per transaction and can execute transactions in as little as 6 seconds.
Mirror Protocol: A platform that enables the creation of fungible or synthetic assets that may be referenced in real-world asset pricing, such as Tesla, Amazon, Alphabet stocks, and others.
Anchor Protocol: The platform offers borrowing and coin deposit services at a set annual rate of 20%.
Talis Protocol: A marketplace for artists to sell and produce.
Vega Protocol: Crypto Mining and Derivatives Trading Platform
The South Korean government has also backed Terra. TerraKRW (KRT) is a won-based token that can be used to make payments via platforms that are linked to 14 banks and three prominent companies: NEXON, TMON, and GMV. As a result, Terra has become extremely popular in Korea and throughout the Asia-Pacific region.
It can be stated that LUNA plays an essential part in numerous platforms under Terra's operation in different features: payments, speculations, loans, and investments in yield farming, making LUNA a digital asset and a highly intriguing DeFi coin.
According to the website Coinmarketcap, as of February 10, 2022, Terra (LUNA) is the 10th largest cryptocurrency, with a market valuation of around $2.2 ten billion, or approximately 7.4 hundred billion baht. The total supply of Terra (LUNA) is 818,510,166 and about 401,364,749 tokens are currently in circulation.
Furthermore, Terra (LUNA) had a peak price of 3,373.38 baht. At the time of writing, the price is hovering around 1,860.35 baht.
The utilization of Cosmos SDK, or software development tools, is an intriguing technology. It is a component of the Cosmos technology, which is notable for its ability to create stablecoins and communicate with other blockchain ecosystems via a performance-enhancing Tendermint Consensus mechanism. As a result, Terra distinguishes out for its price stability, because Terra is not only based on fiat currencies, but also includes specialized technology functioning in the background.
Terra is a payment platform for stablecoins that uses LUNA tokens as collateral. The system has greatly accelerated the Korean and Asian markets for blockchain payments with outstanding features that assist stabilize pricing and facilitate rapid payments with low fees, as well as making various kinds of investment in many projects possible. When these factors are joined with Terra Bridge, which allows for easy value transfer between chains, Terra (LUNA) is drawn to universal acceptability and promotes future worldwide growth of the user base outside of Asia.