Like Bitcoin uses a blockchain network system, one currency named Terra acts the same way with LUNA as its native coin and Terra as a stablecoin. If you are interested in bitcoin trading, visit https://bitcoincircuit.cloud/.
What exactly is Terra?
Terra is an open-source network that works on the principles of distributed ledger technology. It uses stablecoins, digital coins backed by the value of other assets. It provides the users with various services such as trading, payments, exchanging, etc.
The Terra protocol is used to track the price of fiat currency (a government-backed currency, such as USD). It uses two coins, LUNA and Terra, one in digital form and one as a stablecoin, to track fiat currency.
Terra
These are stablecoins named after fiat currencies and track their prices. It follows the International Monetary Fund’s value. TerraUSD (UST), which tracks the U.S. dollar, and TerraKRW (KRT), which monitors the South Korean won, are two more Terra stablecoin denominations. The digital coins LUNA can follow the procedure of burning to create fresh Terras.
Luna
Luna is regarded as the digital native coin of the Terra protocol. It is an incentive for the miners responsible for maintaining Terra’s blockchain network. The miners are enabled to record the transactions that take place and verify it by all the nodes. In return, they are rewarded with network fees, which are given in Luna.
How does it work?
The Terra protocol works by stabilizing and creating a continuous balance between the supply and demand of its stable coin. The significant property of stablecoin is its stability regarding its value. Therefore, it assists in eliminating the volatility factor.
Conversely, Luna is a variable in terms of volatility. It maintains the balance of stablecoin by increasing or deducting the number of luna’s supplied coins. Luna is burnt to mint Terra, and on the other hand, Terra is burnt to mint luna. Terra’s protocol carries this burning and minting by using various algorithms.
Growth (of the Terra pool)
When the Trading price is higher than its pegged rate, it implies more demand in the market. As a result, Terra’s supply should be increased to keep up a balance in the supply-demand ratio. Therefore, the protocol forces the users to mint Terra and burn Luna, which results in a lower value of Terra (because of increased supply) while increasing the Luna price (by reducing its circulating coins). The process is continued until stability is achieved between these two.
Contraction (of the Terra pool)
Contrary to it, when Terra trades at a low price ras compared to pegged, it indicates more supply than demand for the stablecoin. This would limit Terra’s supply until the protocol stops giving directions. The protocol then rewards users with incentives for burning and minting. This results in a price surge for Terra (because of less availability) and a price decrease for Luna (by increasing its supply). The process is repeated to attain the protocol’s goal.
Terra’s Advancement
Terra was first created by Terraform Labs, a South Korean company launched in 2018 by Do Kwon and Daniel Shin, who is the CEO of an Asian payment technology company. He was previously the founder of the Korean e-commerce firm TMON. Do Kwon was a former Microsoft employee. They both partnered up for creating this platform.
Ecosystem Terra-Luna
Terra has a rapidly growing ecosystem in the crypto world, with hundreds of projects working across the globe, including decentralized financial applications, non-fungible tokens, and much more. It has taken several initiatives in its mission to become a top e-commerce stablecoin payment and decentralized finance services, provider. These initiatives include:
- The Anchor Protocol is a fixed-yield platform with low borrowing costs and easy access.
- Andromeda Protocol (Andromeda Protocol) is a next-generation NFT protocol.
- Chai is an eminent South Korean payment application.
- LoTerra is a Terra distributed ledger technology-based platform.
- Mirror Protocol: This allows the formation of fungible assets (also known as synthetics) that track the prices of real-world assets.
- Talis Protocol is a marketplace enabling artists to sell their work and provide services (corresponding to artwork in NFTs).
- The Vega Protocol is a trading and minting platform.
In a nutshell, Terra is another advancement in crypto, enabling users to enjoy various functionalities.
