About Terra Luna Classic  (LUNC)

Terra Luna Classic is the rebranded Terra decentralized stablecoin project that was once home to a thriving ecosystem. It is not to be confused with Terra LUNA 2.0, a new chain launched after the original chain’s demise. (Terra 2.0 launched, sans stablecoin, on May 28th 2022).

LUNC, as the reincarnation of LUNA, still harkens back to an original mission of supporting programmable payments but without the volatility associated with crypto, generally. In other words, per Messari, it is a stablecoin platform, one that is algorithmically governed, and which plays host to a collection of fiat-pegged tokens (e.g., USTC) and a stabilizing crypto, Luna Classic, or LUNC.

During the late summer and fall of 2022, LUNC has remained in the news and captured speculative attention. This was because of a burn policy being passed. Officially known as Proposal #3568, the measure resulted in a burn tax of 1.2% on all on-chain USTC and LUNC transactions. The measure was meant to help transform LUNC from being hyper-inflated into a deflationary token. The taxed LUNC gets removed from the circulating supply by way of a direct transfer a dead address. The tax burn movement is trying to get the supply of LUNC (nearly 7 trillion) reduced to 10 billion.

Although this burn narrative has taken center stage and generated some “fear of missing out,” or “FOMO,” there is a purpose to LUNC beyond just being some kind of a meme-like coin that garners a loyal following and social media hype galore. It provides liquidity to the Terra network by granting token holders access to staking tools which generate rewards from both staking and the arbitrage trading opportunities surrounding price fluctuations and auto adjustments. LUNC is also used for governance.

LUNC was designed to absorb the price deviation of the algorithmic Terra stablecoin, which was pegged to the US dollar, by minting and burning, balancing supply and demand of the coin. However, in May of 2022, TerraUSD collapsed and generated a hyperinflationary death spiral.

As of late September of 2022, LUNC was garnering wider attention in the industry following an unexpected rally and growing curiosity over new measures to burn LUNC supply, setting up a hard-to-resist narrative of perhaps a significant rebound possibly to come – or even a move above one cent – resulting in speculative buyers snapping up the distressed LUNC asset at less-than-a-penny prices.

When was LUNC created and how much was it worth?

LUNA, of which LUNC is a remnant, first began trading in July of 2019 at about $1.25 and reached an all-time high of $119.18, according to CoinGecko.

How is the price of LUNC determined?

LUNC maintains its 1:1 peg through an algorithm that automatically adjusts the volume of stablecoins in the Terra ecosystem based on its demand. This means that if one of Terra’s stablecoins, such as TerraUSD, deviates from its peg, LUNC would thus act as an equalizer that supports the price correction via market forces until parity is restored.

But that set-up is theoretical and assumes a functioning Terra ecosystem, such as the one that existed before it all came crashing down in spring of 2022. The de-pegging of UST led to hyperinflation. The Terra Classic community is betting on a burn campaign to get the supply down from nearly 7 trillion to 10 billion. If that effort continues to gather steam, the price of LUNC eventually could increase.

Why does LUNC have value?

LUNC as of September of 2022 might be a target of FOMO-minded speculators but over the long-term it will be reliant on the success of its stablecoin, USTC, and also on prospects for a revival of its decentralized payments mission in a world growing more comfortable with digital money but lacking infrastructure.

Is LUNC secure?

Arguably, as a result of the de-pegging of UST and LUNC’s diminished price, the project generally carries with it a stigma of volatility and uncertainty.

Terra, from a technology standpoint, remains a distributed ledger of account balances maintained by validators, as Messari explains. These validators follow the Tendermint DPoS algorithm and vote on blocks. LUNC is the native staking asset. Terra was built using the Cosmos SDK, which provides a robust framework for constructing blockchains that run atop the Tendermint Consensus Protocol, Messari said. Tendermint describes itself as software for securely and consistently replicating an application on many machines. "By securely, we mean that Tendermint works even if up to one-third of machines fail in arbitrary ways," Tendermint's website says. "By consistently, we mean that every non-faulty machine sees the same transaction log and computes the same state."

What are the main benefits of LUNC?

• Terra was first created with the singular vision of "facilitating the mass adoption of cryptocurrencies by creating digitally native assets that are price-stable against the world's major fiat currencies," Messari said. LUNC still harkens back to that mission, that is, combining the borderless benefits of cryptos with the day-to-day stability of traditional financial assets. Terra Class thus remains a potential solution for digital payments, one that could one day see LUNC holders transact with the token, as opposed to LUNC just being a vehicle for speculators.
• LUNC seeks to maintain a peg through an algorithm that automatically adjusts. This activity involves incentives given to LUNC holders to swap their LUNC and stablecoins at profitable exchange rates to either expand or contract the total stablecoin supply.
• Liquidity hub Binance recently committed to burning all fees collected through LUNC spot and margin trading pairs on the platform, with the burn paid at Binance’s expense. This is in an effort to contribute to the supply decrease of LUNC to support the rebound of the asset.

What do critics say about LUNC?

LUNC in late September of 2022 received a bearish rating from InvestorsObserver.

Additionally, Motley Fool referred to LUNC as a "mix of speculation and desperate hope." And as the website's crypto writer Emma Newbery pointed out, LUNC, despite its recent gains, is still worth only a tiny fraction of its predecessor, LUNA, at its height (of almost $120 in April of 2022). "It's easy to understand why people who got burned by Terra's crash might hope to recover some of their money through a revival of the system," Newbery said. "However, it's also almost impossible to see why anyone would trust either Terra – new or old – after such a monumental collapse. With a host of smart contract blockchains out there, Terra Classic will need to do more than burn a few coins to rebuild its foundations."