LUNA is the reserve currency of the Terra payment network. Smashing the norms involved in traditional, centralized systems for facilitating financial transactions – and reconstructing them in a decentralized manner on the blockchain – Terra allows for safe, secure “programmable payments,” around the globe.
It does this by using a basket of fiat-pegged stablecoins. Terra network's smart contracts maintain equilibrium, algorithmically, with LUNA in the role of "The Equalizer."
For example, if the network detects a Terra stablecoin, such as TerraUSD (UST), has deviated from its peg, it can correct that via market forces. So, in this example, if the price of 1 UST goes above its 1:1 USD target, the protocol will increase the supply of UST, minting and swapping until parity is restored.
Price stability and ease of use were at front of mind when Daniel Shin and Do Kwon founded Terraform Labs and the Terra network in South Korea in January 2018.
Shina had founded one of Korea’s largest e-commerce platforms, TMON, and was keenly aware of just how many millions on won were being devoured by transaction fees. He eventually hooked up with Kwon, the founder of Anyfi, a peer-to-peer WiFi solution using mesh network technology, a way to turn individual devices into a shared network.
Their thesis in a time of severe market swings: because of such wicked price fluctuations, cryptos weren't being widely adopted as a means of payment; and that Bitcoin was way too volatile to perform the role, hence the need for a decentralized stablecoin, LUNA, to be the digital money of choice for consumers and merchants.
LUNA is used to provide liquidity to the platform. The network allows coin holders to participate in staking which generates rewards which in turn, allows them arbitrage trading opportunities surrounding price fluctuations and auto-adjustments. LUNA also serves as Terra’s governance token.
Terra runs on the Proof-of-Stake (PoS) Cosmos blockchain which is not as widely used as Ethereum but has its advantages i.e. it’s a faster and less expensive realm in which to facilitate payments. Some $300 billion worth of payments has transacted on Terra on behalf of 2 million users.
The Mirror Protocol, built by Terraform Labs and a popular feature of the Terra blockchain, makes it possible to mint tokens that mirror the prices of stocks and other assets.
Because Terra isn’t built on Ethereum, with all of its many-splendored applications, as Benzinga has pointed out, the platform has a smaller user base and less liquidity compared to some of its competitors.
To stoke mass adoption, the platform formed an e-commerce consortium, the Terra Alliance, comprising 15 players such as TMON, Qoo10, Carousell, and Pomelo, throughout South Korea and Southeast Asia. Terra functions as the backbone for apps and products being created by the alliance.
This past September, Terra launched its first-ever non-fungible token (NFT), facilitating (at a fraction of the cost relative to Ethereum) the creation of some 800 "SpaceLoots" for use in a coming video game.
What is the price LUNA?
As of late September 2021, LUNA was roughly $38 or some 30,000% higher than it was in March of 2020. In late January of 2021, LUNA crossed $1 and never looked back. Even when crypto cratered in May of 2021, LUNA was still trading at about $4 and then during the summer of 2021, it went parabolic. On Sept. 11, 2021, LUNA reached an all-time high of roughly $44.
LUNA's market capitalization is roughly $15 billion, making it the 12th-largest crypto asset, as ranked by CoinGecko.
Terra’s LUNA did not have an Initial Coin Offering (ICO). Instead, it held, in early 2019, a series of private sales for the LUNA coin. Investors included exchanges and venture capital firms.
An estimated 385 million LUNA were minted and put into circulation at prices said to range between 15 and 80 cents per coin. Allotments of subject-to-vesting-period (i.e. locked up) LUNA were spread around to early investors, employees, alliance members, and placed in reserves; and there is an estimated one-third that are used for staking on their network; put another way, the tokenomics involved here are murky. The maximum supply is set at 1 billion tokens. However, the minted supply can at times in the course of equilibrium-keeping activities exceed that total in which case the extra tokens will be burned.
What the bulls are saying
*Terra is working hard to integrate their tokens on the Ethereum network, which may expand the user base of the platform significantly, Benzinga said.
*Terra (LUNA) is expected to continue a bullish trend throughout this year, Coinpedia analysts said: “Based on its growth pattern and predictions, LUNA price could smash $50 by the end of 2021.”
What the bears are saying
*"The price is looking incredibly stretched and ripe for a correction," said Elliott Laybourne, a veteran investment bank trading specialist writing in late August of 2021 in InvestingCube (with LUNA ranging between $20-$30).
*According to the stochastic oscillator, a useful indicator of overbought and oversold conditions, Terra (LUNA)’s crypto is considered to be overbought, Via News said in mid-September.
*It doesn’t help that Terra hasn’t updated its roadmap, the most recent having been released more than a year ago, the engineer-blogger is known as “Sales Wallet” wrote on Medium.
“I don’t think the Terra will be the back end of the global payment system anytime soon,” that post concluded. “With only a few hundred transactions per second, it’s a bit of a miracle that the Terra blockchain is not been completely clogged up by its existing user base.”
This article is for informational purposes only and takes no account of particular personal or market circumstances, and should not be relied upon as investment, tax, or legal advice. For investment, tax, or legal advice and before taking any action you should consult your own advisors. Note that digital assets such as cryptocurrencies present unique risks for investors. Please see our disclaimer regarding risks specific to holding digital assets before investing.
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This content is correct as of September 2021
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