Terra is a crypto ecosystem akin to that of a Lunar orbit, in which there is a constant balance to preserve with the goal of maintaining stability through an otherwise highly volatile marketplace.
“Your economic security does not lie in your job; it lies in your own power to produce ? to think, to learn, to create, to adapt. That’s true financial independence. It’s not having wealth; it’s having the power to produce wealth.” ? Stephen Covey
Terra (UST) was founded in January of 2018 by Daniel Shin and Do Kwon out of South Korea. UST, also known as TerraUSD, operates on Dan Larimer’s DPoS (Delegated Proof of Stake) consensus mechanism in which validators vote to make changes within the system, much like the well-known EOS. Shin and Kwon became focused on the problems that arose from a volatile and rapidly expanding cryptocurrency market and aimed to find solutions.
LUNA, Terra’s native token, is a cryptocurrency asset with utilities and options for users whose unique focus is smoothing out ebbs and flows in the market. The cyclical properties of the currencies algorithm help to ensure that temporary volatility does not dramatically harm users and can reward them for staking LUNA with short-term market volatility risks. It is the relationship between Terra’s USD stablecoin (UST) and their native token (LUNA) working in unison and Terra Network’s partnered stablecoins and pegged fiat currencies which are rapidly expanding in number that makes this all possible.
It’s a reasonably complex crypto ecosystem at first glance, so I hope the below video from Terra helps illustrate the process; I find visualizations help with these types of concepts as they can be confusing in word form, particularly in relation to concepts such as varying scarcity and contraction.
An Introduction to Terra:
UST (TerraUSD) is a non-collateralized, yield-oriented stablecoin, which means it is not backed by any other currency, neither fiat nor crypto, and offers staking rewards. Instead, Terra uses a mathematical mechanism within its algorithm to keep the mid-market price in check through a system of balances with its native token, LUNA. The system uses smart contracts to burn LUNA when the mid-market price drops to raise demand and to generate new UST by exchanging 1$ equivalent UST to 1$ equivalent LUNA, a process also known as seigniorage.
During every LUNA/UST pair tx (transaction), a percentage of the LUNA is burned, while a percentage goes into a community pool. Over time, LUNA becomes more and more valuable, and the profit from it is reinvested in various DeFi projects in the Terra and general crypto communities. From here, the cycle has gone full circle only to go around again, and again, and again while LUNA’s mid-market value continues to grow. Validators (holders who opt to stake) always profit in UST; regardless of the price or demand, fees are adjusted to scale. Terra has other participating stablecoins outside UST, such as Terra KRW (KRT) and Terra IMF SDR. These features make Terra an inter-chain stablecoin. Terra is pegged to multiple forms of fiat. The decision to use more than one form of FIAT, such as USD, comes down to wanting an equal and ongoing redistribution of wealth. It came to attention not long ago that no stablecoins efficiently scale with the growing cryptocurrency market; so again, Terra set out for a solution and found it.
Due to their massive interest and success in crypto mass adoption, which has already seen great results in the East, the Terra team took into account that fiat currencies were well-established in various areas and are still the primary form of currency in use throughout the world. The reason for using more than USD is simple, the world uses more than USD, and therefore by implementing more forms of fiat for pegs, the global Terra economy is less subject to daily global volatility as people are in the stock market for example. LUNA is currently worth $13.32 USD per token, soaring up from 0.60c USD at the beginning of 2021’s Q1. This growth amount is an extremely impressive gain to hold, and after touching its ATH (All-Time High) of $22.06 on March 21st, 2021, LUNA remains bullish.
Staking is optional with LUNA for those interested in a passive UST income, though it is not required. Regular holders are still permitted to vote within the governance or sovereignty system, keeping all involved parties involved with decision-making. I find it very appealing that Terra is committed to keeping their project about utility and not trading and offers a passive income stream for stakers while maintaining transparency on their project.
Overall, I am impressed. In terms of projects I have recently researched, this one stands out a great deal. Who doesn’t want to ride the white caps of the crypto deluge torrents with some peace of mind; who doesn’t want to see transparency, a history of hard work, and solid, lasting results with empathy for crypto users on a global scale?
The community factor is most interesting; it seems to be the founder’s love for crypto was that which drove them to want to help perpetuate the growth of the overall crypto economy; I can relate. I applaud them for their hard work and I hope to see their successes continue!
You can download the Terra-supported Station Wallet here.
As always, comments, suggestions, and friendly debates are highly encouraged.
Stay smart & Stay safe.
-Thomas Wolf
Pronouns: He/Him/His
Cryptowriter is conducting podcasts that can be found on YouTube, Spotify, Anchor, PocketCasts, and more to come.
DISCLAIMER
I am not a certified financial, tax, or legal advisor, analyst, or planner. The above information should not be considered advice but as an opinion intended to share information and ideas for entertainment and independent research purposes. Cryptowriter and its writers are not responsible for any losses or damages incurred as a result of misinterpreting personal opinions for professional advice.
This article was originally published on Voice.com
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