CoinMarketCap takes a deep dive into Terra (LUNA), the native token that runs on the Terra blockchain protocol, that offers staking rewards to its holders. We look at what caused the impressive 1235% spike in LUNA token price, features of Terra, future outlook and LUNA price prediction.
Terra (LUNA) powers the Terra network, and acts as a governance and staking token that supports Terra's stablecoins and payment processing systems.
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The Recent 1235% Spike In Terra (LUNA) Price
The bullish trend of LUNA started from $6 and in the last month alone it has seen a 1235% ROI for LUNA holders. On 1st August 2021, LUNA was priced less than $12, however, this month proved to be an exciting one for the coin as a bullish pattern engulfed it and the price soared close to $35!
On August 17th alone, LUNA went up by 37%. The biggest catalyst being cited behind this huge spike is the acceptance of Wrapped Luna & TerraUSD on Coinbase Pro (one of the top centralized crypto exchanges) on August 12.
Another probable factor behind the latest price surge of Terra (LUNA) is the news about the upgrade called Columbus-5. This upgrade will provide additional incentives for stakers in the Terra ecosystem and allow more applications to be created on the Terra network. In summary, new upgrades to the Terra network may continue to spike the price of Terra (LUNA), much like the case with Ethereum or any other major blockchain and its tokens/coins.
How Does Terra (LUNA) Work?
The blockchain – Terra is a completely digital, decentralized financial corporation – kind of a central bank in its own domain. Customers can accrue interest on their digital assets, spend it using the company's payment system, or even trade-in synthesized stocks. Terra (LUNA) – the company's token, underlies much of what it accomplishes.
The Terra platform provides a variety of stablecoin alternatives with an instantaneous settlement. Terra does this by employing a price-stability algorithm that proactively changes an asset's monetary supply to maintain its value. This mechanism helps Terra in offering its customers cheaper fees, increased stability, smoother cross-border exchanges and more responsive financial assets.
The Popular Debate Of Stablecoins Backed By Traditional Money
Tether (USDT), the most prominent stablecoin by market capitalization, ran out of reserves at one point in 2019. This is important because, at that particular point in time, there would not have been enough money if everyone sought to cash in their USDT.
Tether is an 'off-chain' asset-backed stablecoin, meaning it is supported by non-crypto currency bank deposits.
Terra's currencies, on the other hand, function uniquely. Algorithmic stablecoins are backed by the LUNA token. To keep the price steady, algorithmic stablecoins employ a central bank or a pool of tokens managed by smart contracts. If the price of UST climbs above $1, for instance, the algorithm will use LUNA to generate more UST and lower the price. If the price dropped for some reason, it would switch from UST to LUNA to raise it again.
LUNA is essential for Terra's stablecoins to remain stable. Token holders can stake the coin to be compensated for absorbing volatility, for which the Terra payment network pays token holders a portion of transaction fees.
The Vision Behind Terra
Terraform Labs, the South Korean firm founded by Daniel Shin and Do Kwon in 2018, intends to use Terra's blockchain and related cryptocurrencies to create a better (digital) financial system free of big banks and fintech app developers. So far, the Chai payment app, which is built on Terra's blockchain, has been its major source of growth in Korea, where consumers have used it to buy products in businesses, like coffee and other consumer items. The company's related Mirror trading app, according to Kwon, is growing in China and Thailand.
Apart from cryptocurrencies, Terraform Labs is working on a variety of other initiatives, including the Anchor Protocol – a high-yield savings account for Terra (LUNA) digital currency holders. Users can use the Mirror Protocol built on Terra blockchain to generate synthetic financial assets that resemble more traditional ones, such as "tokenized" corporate stock assets. These synthetic assets are meant to allow small businesses to acquire shares and receive access to the upside of equities, which otherwise they wouldn't have been able to access, according to the co-founder of Terra-form labs, Kwon.
Unique Features Of Terra (LUNA)
Staking Rewards To LUNA Holders
Holders of Luna tokens have the option to stake their tokens in the Terra ecosystem. Users pledge their tokens to the Terra network when they stake Luna, after which their tokens are used to validate transactions. Users have the option of unstaking their tokens from the Terra ecosystem, however, it may take up to 21 days for the unstaking process to complete. Staking LUNA provides the holders with a recurring share of the transaction fees that Terra receives on the use of its stablecoins.
The distribution of Terra coins is done based on Terra protocol in which the tokens are first distributed to validators who receive their commission for their services and then the delegators are paid their fair share of tokens.
Like any other staking mechanism in the crypto world, the rewards that LUNA holders get from staking depend on the size of the stake – the number of rewards is directly proportional to the size of the transaction volume. As more Terra applications or use cases for UST arise, the demand for LUNA will increase, leading to the rise in value of LUNA.
Use Of Stablecoins
Terra makes use of a configurable architecture to deliver self-stabilizing stablecoins and other unique characteristics to the market. The network depends on an elastic monetary supply mechanism to achieve this goal. The network changes the supply of its stablecoins automatically to keep their prices tied to their underlying assets.
At the moment, Terra has a wide variety of stablecoins to choose from including TerraUSD (UST), TerraSDR (SDT), TerraKRW (KRT) and TerraMNT (MNT). All of these stablecoins are tied with a currency behind them like the US dollar, Mongolian tugrik, South Korean won and others.
Anchor Protocol
Anchor is a low-volatility savings mechanism based on Terra stablecoin deposits. It is introduced by the network as a way for Terra stablecoin holders to receive incentives. Terra stablecoins receive earnings in the same way as a bank account does. The Anchor rate is supported by a diverse supply of staking rewards from major proof-of-stake blockchains, making it far more stable than money market interest rates.
Instant deposits and withdrawals are supported by the protocol. Anchor also serves as a lending system, allowing borrowers to secure short-term loans with liquid-staked PoS assets from various blockchains.
Mirror Protocol
Mirror is a DeFi protocol powered by smart contracts on the Terra blockchain that allows the creation of simulated assets known as ‘mAssets’ (Mirrored Assets). mAssets replicate the market behavior of real-world assets, allowing traders from all over the world to gain price exposure without the hassles of owning or transacting actual assets.
The Mirror Protocol allows Terra users to simply construct fungible assets. Synthetics are the name for these newly generated assets. To create a Mirror asset (mAsset), you just need to put up more than 150 percent of the existing asset's value as security in Terra stablecoins or mAssets.
Terra Gas
Terra, like Ethereum, incorporates the utilization of gas to execute smart contracts. This method aids in the removal of spam from the blockchain and provides miners with an additional incentive to carry out these operations.
Validators establish minimum gas prices and invalidate transactions with implied gas costs that fall below this level. The computation fees are distributed to the collaborating validators pro-rata to stake at the conclusion of each block.
Advantages Of Terra (LUNA)
Terra (LUNA) is an excellent option for the digital economy since it's decentralized and requires no permission from anyone – permissionless. The Terra network provides low-cost programmable payments and transaction costs, and an infrastructure that makes decentralized applications (DApps) and stablecoin development easier.
Financial Management Becomes Easy
Terra's development team prioritized the creation of a transparent environment. To solve the complex payments value chain, the network was created from scratch. Terra, in particular, uses a single blockchain layer to decrease or eliminate the requirement for credit card networks, banks and payment gateways.
Interconnection Between Several Chains
Terra is all about the collaboration and interconnection of its ecosystem. The Cosmos IBC connects several chains, allowing the network to function on many chains which explains its availability on Ethereum and Solana. In the near future, Terra has plans to broaden its cross-chain capabilities to accommodate additional high-performing blockchains.
Variety Of Configurability Options For Programmers
The agenda of Terra is “Programmable Money for the Internet”, hence it is developer-oriented. Programmers can use the network to create smart contracts in Rust, Go, or AssemblyScript. Moreover, a Terra user can leverage the network's oracles to provide new functionality to their Dapp. Oracles are off-chain sensors that can send and receive data between the blockchain and the outside world. Many blockchain networks rely on oracles, particularly when it comes to price discovery.
Terra (LUNA) Tokenomics
The total supply of Terra (LUNA) stands at 994,020,157 coins and the circulating supply is currently at 403,360,309.15 LUNA.
Terra Treasury’s main aim is the allocation of resources obtained from seigniorage to DApp. Seigniorage is the value generated from issuing new LUNA. To receive seigniorage, a DApp needs to register on the Terra network. DApps are eligible for funding depending on their economic activity and use of funding.
Terra (LUNA) Price
Terra (LUNA) is now trading at $34.08, as of Aug. 30, 2021. Its 24-hour trading volume on exchanges is around USD $1,295,797,432.
Terra (LUNA) Future Outlook and Price Prediction
As of Aug. 30, 2021, Terra (LUNA) is trading at $34.08. Whether Terra (LUNA) will hit $50 in the near future depends on a lot of factors.
Terra (LUNA) is currently ranked in the 12th position on CoinMarketCap in terms of market capitalization, which stands at $13,621,149,804, at the time of writing. This is a huge indicator that the price of LUNA may move towards an upward direction in the near future.
The technical indicators of Terra (LUNA) suggest a strong upside momentum in the coming weeks. A strong bullish pattern is forming, however, the coin may face some resistance on $35. If it manages to break $35, the price may shoot up to $50 in a short period.
The price stability factor of LUNA is not present in many digital cryptocurrencies which makes it a stable currency that complements both fiat and digital currencies to transact and store value. The stability protocol in LUNA which automatically improvises the supply of Terra with the change in demand keeps the price stable which may be a major factor why LUNA can hold off its probable resistance at $35 and fly to the $50 mark.
Almost every digital coin that has its own blockchain invites major investors (whales) to invest in the cryptocurrency. The inclusion of whales in any cryptocurrency spikes its price and breaks all-time highs constantly. Two major examples we see in this case are Bitcoin and Ethereum – where whale-inclusion, such as greater institutional interest, is a significant indicator of price movement – and taking the two cryptocurrencies to the moon.
Now, considering a lot of volatile factors, it is very difficult to say in which direction Terra (LUNA) will tilt, which is why it is advisable to keep an eye on market indicators and technical opinions of cryptocurrency experts before investing in this token.
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