Why is the Terra blockchain so special and why is LUNA growing so fast?
Tera was founded in 2018 by a South Korean blockchain company called Terraform Labs, founded by Daniel Shin and a former Microsoft employee. After raising $ 57 million in investor funding, on July 16 of this year it raised $ 150 million from investors including Arrington Capital, Lightspeed Venture Partners, and Pantera Capital.
Terra became popular in June 2019, coinciding with its announcement of a partnership with South Korean mobile payment service CHAI. In fact, in South Korea, they use Terra's UST stablecoin to buy real-world items. For example, movie tickets. CHAI is integrated into one of the largest e-commerce platforms in the country, TMON, with more than 10 million users. In other parts of the world, the Terra blockchain is known for its two DeFi platforms.
What makes LUNA so special
All this is thanks to Terra that uses a blockchain protocol that focuses on stablecoins, has two cryptocurrencies: LUNA tokens and UST stablecoins. LUNA tokens are used as collateral to achieve the price stability of the UST stablecoin. Unlike other stablecoins (such as Tether) whose prices are directly pegged to the US dollar, the Terra platform uses a loose monetary policy to maintain the stability of its cryptocurrency.
The process is similar to that of the DAI stablecoin, but the opposite. In DAI, you must create a new DAI to mortgage the loan, and in Terra, you must destroy the LUNA tokens. DAI expanded the monetary base, while LUNA reduced it. In other words, to create a new UST, you must consume the same amount of LUNA dollars.
I give you an example so that you understand me
Suppose the price of the LUNA token is $ 10. The user owns 10 LUNA worth $ 100, and the price of the UST stablecoin is above $ 1 (it should be worth it). If this is the case, LUNA holders will be incentivized to burn LUNA to create UST and make a profit. For example, if the price of UST is $ 1.30, then a user with 10 LUNA will get 30% of the profit in UST. In other words, the user will make a profit of 30 USD (100 USD (LUNA) 1.3 = 130 UST).*
Similarly, and vice versa, if the UST is less than $ 1, the owner of the UST is incentivized to convert it to a LUNA for profit.
And why is this coin very interesting?
*The price of Terra Blockchain's LUNA cryptocurrency has risen 705% in the last 3 months. At the beginning of summer, its price has not reached 5 dollars. As of press time, its price is $ 35.8. Terra's birth goal is to create a blockchain to promote e-commerce through stablecoins. Its recent growth is related, first of all, to the two DeFi protocols launched last year: the mirroring protocol and the anchor protocol.
