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LUNA: Terra Volatility Absorber.

LUNA: Terra Volatility Absorber.
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In recent times, stablecoins have proven to be a vital component of the crypto industry. Hence, many people are now turning to these coins as the bridge between cryptocurrencies and fiat currencies. The importance of stablecoins is laid bare in the growth of their market capitalization, which has grown from $20B in October 2020 to over $156,2B in 2021. Now it keeps its staggering escalation at a dramatic rate.

Among the list of various stablecoins in the market, we have the Terra blockchain-based UST and its other counterpart the Terra LUNA. The Terra blockchain uses Cosmos SDK for creating stablecoins and its stablecoin isn’t fiat-backed or over-collateralized. Instead, it is algorithmic and powered by the Terra LUNA token. The LUNA crypto coin can be found on LUNA crypto exchanges, which will be discussed in this piece.

LUNA: Terra Volatility Absorber

What is Terra LUNA?

Terra exploits the power of stablecoins to drive global price-stable systems of payment. Going by the details in its whitepaper, the Terra crypto merges the censorship-resistance capability of cryptocurrencies with the wide adoption and price stability of fiat currencies. Combined together, these features offer affordable and swift payments.

The founders of Terra, Do Kwon and Daniel Shin, began working on the protocol in 2018 and the official mainnet was launched the following year. As recently as September 2021, the Terra ecosystem launched stablecoins that are pegged to the following fiat currencies including Mongolian tugrik, South Korean Won, U.S. Dollar, with more options proposed.

The native coin of the Terra network is the LUNA crypto and it is used to maintain the stable rate of the Terra blockchain’s stablecoins. Additionally, the holders of the Terra LUNA coin can vote on matters of governance on the protocol, which also makes the LUNA crypto a governance token.

Terra (LUNA)

Key features

  • Algorithmic Stablecoins

The Terra LUNA coin operates as an algorithm-based stablecoin that maintains its fiat-peg by automatic adjustments of the stablecoin supply and demand curve using an algorithm. The stablecoin supply and demand are adjusted through incentives provided to holders of Terra LUNA crypto to carry out LUNA/stablecoin swapping at profitable exchange rates. So, the stablecoin supply is contracted or expanded based on demand.

  • Staking Rewards To LUNA Holders

Luna token holders are allowed to stake their tokens in the Terra network. Just like most crypto protocols, staking rewards on Terra Luna are always calculated in proportion to the amount of Luna crypto coin staked. Similarly, the number of rewards is directly linked to the transaction volume size.

Key features

  • Anchor Protocol

Luna Anchor protocol is described as a low-volatility savings mechanism that uses Terra Stablecoins deposits. The mechanism functions as a means to provide Terra stablecoin holders with incentives. 

  • Mirror Protocol

On the other hand, the Mirror protocol is powered by smart contracts on the Terra network to allow the creation of stimulated assets called “mAssets”, Mirrored Assets. The mAssets are replications of real-world assets to allow traders to gain price exposure without possessing real-world assets and the hassles that come with them.

  • Terra Gas

Just like similar cryptocurrencies like NEO and Ethereum, the Terra network requires gas fees to process transactions. In other words, without Terra gas, smart contracts can’t be executed. Utilizing the mechanism does not only eliminate spam from the blockchain but also provides miners with extra incentives to execute these operations.

Key features

Terra ecosystem

The Terra ecosystem is very much centralized around its dominant stablecoin, which is the UST. Furthermore, most of the TVL is found mostly on some key protocols like the Anchor protocol.

Nevertheless, the Terra ecosystem is projected to witness explosive growth after the Columbus-5 main-net upgrade. In the meantime, let’s focus on the ongoings inside the Terra ecosystem. 

  • Stablecoins

The top project of the Terra ecosystem is the stablecoins, with its UST being the dominant stablecoin in Terra. The plan is to raise the demand for UST by excluding other stablecoin pairs like USDC, USDT, DAI on the Terra crypto ecosystem.

Being pegged by a smart mechanism with LUNA will not just bring stability to the price of UST but also increase the value of Terra native token “LUNA”.

Terra ecosystem

  • AMM

There are three notable Automated Market Maker sectors in the Terra LUNA ecosystem, which are Astroport, Loop Finance, and TerraSwap. Currently, Terraswap is the most dominant with most TVL due to its advantage of being an early mover. However, the appearance of other AMM has led to some competition in the AMM sector on the Terra ecosystem.

  • Lending

As of now, there are three lending projects available to users on Terra. It includes Mars Protocol,  Edge Protocol, and Anchor Protocol. Despite the availability of three lending protocols, the only live one currently is the Anchor protocol, accounting for about 40.48% of the total TVL in the Terra Luna crypto ecosystem.

Moreover, the Terra blockchain features functions like Yield farming, Synthetic, IDO, NFT, payment, and charity protocols.

Terra ecosystem

Difference between UST and LUNA

The primary difference between UST and LUNA is that UST is a stablecoin while LUNA is a utility token of the Terra ecosystem. Furthermore, the functions that each token plays in the Terra network are different as well, and this will be discussed below.

Terra Luna is known to play four vital roles on the platform, which are:

  • Utility token: can be used to pay transaction fees in its gas system
  • Governance token: holding Luna provides a means for users to participate in the governance system. Thus, staking Luna tokens also provides users with the authority to create and vote on proposals that affect the Terra ecosystem
  • Volatility absorber:  stabilizing the price of stablecoins minted on Terra
  • Staking in consensus: it is the token needed to stake in the DPS consensus mechanism behind validators processing network transactions

Difference between UST and LUNA

Thanks to its burn tokenomics, LUNA’s maximum supply cannot exceed the limit of 1 billion LUNA coins. Once the network records an extension of this limit, the tokens are burnt to return their supply to the equilibrium level of one billion tokens.

Concerning the Terra USD, it is not only secured by the smart-contract algorithms but also by Luna Coins. To mint Terra UST, users are required to burn the dollar-equivalent amount of LUNA.

Terra’s Seigniorage is a small amount of Luna tokens used to mint stablecoins, which are sent to the community treasury, thus, providing another profitable means for the Terra network. A centralized process similar to Seigniorage is when Central Banks profit off printing money.

Difference between UST and LUNA

How to exchange Terra (LUNA) coins?

Users can acquire Terra (LUNA) by following these simple steps on Swapzone:

Step 1. Go to Swapzone.io to get your work started.

Step 2. Select BTC in the “Send” section.

Step 3.  Specify the total amount you are going to transfer.

Step 4. Select LUNA in the “Get Up To” section.

Step 5. Next, review the offers on the screen. You will find multiple offers with the best rate listed at the top. You can also see how many minutes it would take for you to complete the exchange.

Step 6. Confirm the offer you wish to utilize by clicking “Exchange” and then enter the wallet to receive LUNA.

Step 7. After that, use the generated BTC address to send your BTC deposit.

Step 8. Wait for the deposit to be processed by the exchange service and the exchange to be done.

Step 9. Do not forget to rate the exchange partner, so we can gather more information on the exchanges for future users.

What is the best crypto exchange to swap LUNA?

LUNA is available on many crypto exchanges. However, it is very important to use reliable platforms. As an example, you can use Swapzone to also compare rates or try our one of our direct partners:

  • ChangeHero
  • Changelly
  • Exolix
  • Swft
  • SimpleSwap
  • ChangeNOW

What is the best crypto exchange to swap LUNA?