A Rising Star: Terra (LUNA)
What is LUNA?
Terraform is the parent company of the cryptocurrency asset LUNA. Recently, the coin saw a surge in both price and market cap, passing up popular cryptocurrencies like Shiba Inu, Doge, and Avalanche. Terra’s website describes LUNA as a “decentralized reverse asset”. The Terra network effectively uses algorithms to generate stablecoins that correlate in price with other assets, like fiat and gold. The entire purpose of the network is to eliminate some of the volatility often associated with assets in the crypto space.
LUNA is another coin that people label as an “Ethereum Killer” much like the 5th ranked crypto, Solana, and the 12th ranked crypto, Avalanche. All of these coins run on their own blockchains that boast faster transaction times and lower overall energy usage than Ethereum. Ethereum still has market dominance and more overall compatibility within the crypto system as a whole, but it now has competitors moving close.
Why is this different from other cryptocurrencies?
Terra relies on Cosmos for a lot of its functionality, which now allows IBC (inter-blockchain communication) for the network. This is thanks to changes from Columbus-5 update, and is a huge step for Terra. IBC allows for token transfers, oracle data feeds, and NFTs to transfer across blockchain networks. Networks that Terra can now communicate with include DOT, ETH, and SOL. This further solidifies Terra’s place in the crypto world.
TerraUSD (UST) is a stablecoin on the Terra blockchain, and is currently the fourth highest stablecoin in market cap. Whenever UST is minted, LUNA is burned, making the price of LUNA go up. UST is uncapped, meaning people can mint an unlimited amount, and the price correlates 1:1 with the United States dollar. There are other stablecoins on the Terra network that correlate in price with other currencies like the Won or Euro.
An important thing to keep in mind is that Terra focuses on stablecoins, and that LUNA is essentially a way to allow the coins to maintain their stable price. It’s all a matter of supply and demand. Say UST is in demand, and the price of it is going above $1, LUNA holders are able to convert to UST at the price of $1 LUNA = $1 UST. The holders can then sell back to LUNA at the inflated price of UST, allowing for profits and increasing the stablecoin supply. In periods of low demand, it works similarly in an opposite manner.
Staking and Governance
LUNA also has a staking system, allowing a holder to stake their coins at no risk to their holdings. The staked LUNA is pledged to the network and is used to validate transactions. Stakers receive a portion of the transaction fees used for stablecoin transactions. Additionally anyone who holds LUNA has a say in the decisions Terra makes, because LUNA is a governance token. For more information on anything Terra-related, check out their website.Source