Terra (Luna) Review: Learn Everything About Terra Before You Buy
Terra (Luna) is a blockchain protocol that uses smart contracts, oracle systems, and stablecoins to facilitate the operation of many blockchain-based applications.
Terra’s decentralized infrastructure has brought various theories and concepts to Defi and the cryptocurrency ecosystem. The protocol offers many stablecoin options for users using a unique price stability algorithm.
The algorithm preserves the value of assets on the blockchain by changing the money supply so that users pay lower transaction fees. In addition, the price stability algorithm ensures a smoother and more stable international exchange
A Brief History of Terra Blockchain
The project was originally launched in 2018, founded by Do Kwon and Daniel Shin. According to them, Terra has moved to create smart money with unique operational characteristics to show that the digital economy can be resilient.
Blockchain aims to reduce the variety of problems and problems that even the best stablecoins on the market face. It aims to overcome centralization and address technical grievances with stablecoins through its decentralized financial infrastructure.
Comparatively Terra differs from competitors. It works on many blockchains, which competitors have not been able to do. The project has a stablecoin known as “Terra USD (UST)”. In addition, Terra does not use collateral to stabilize asset prices, but relies on its algorithm.
Moreover, Terra has a more competitive edge over other crypto coins in the market. The company aims to introduce cryptocurrency into already existing products or services that consumers know and use.
However, they do not focus on converting non-crypto users to start using cryptocurrency , and they are better than the competition in this.
Terra’s key features and how it works?
Terra offers self-stabilizing stablecoins to the market through its programmable infrastructure. It maintains the value of stablecoins on the network by regulating their number. This process allows the coins to remain pegged to the underlying assets.
Other Terra (Luna) features include:
LUNA is Terra’s native coin. It is used on the network as a collateral mechanism to ensure stablecoin prices on Terra remain stable. LUNA also contributes to value fixing when placing bets in the ecosystem.
Without the Luna to php, there will be no stakes on Terra. Moreover, miners on Terra receive their rewards in LUNA. You can buy LUNA by clicking on the button below.
Buy Terra from our leading broker
2. Anchor protocol
This is the protocol that allows Terra stablecoin holders to earn rewards on the network. These rewards come in the form of interest on savings accounts because holders can deposit and withdraw their coins when they need them.
In addition, holders can receive short-term loans through the Anchor protocol using their “PoS assets with liquid rates” from other blockchains. These assets will serve as collateral for the loans under the protocol.
Terra offers several options for stablecoins, such as TerraUSD (UST), which are directly pegged to the US dollar. It also offers TerraSDR (SDT) pegged directly to the IMF’s SDR, TerraKRW (KRT) pegged to the South Korean currency (won), and TerraMNT pegged directly to the Mongolian Tugrik.
4. Mirror Protocol
The Mirror protocol allows Terra users to create various fungible assets (NFTs) or “synthetics”. These fungible assets track the real prices of the assets and enter them into the Terra blockchain as the basis for smart contract blocks.
However, in order for the user to mint mAsset, he/she must provide a deposit. The collateral will lock Terra stablecoins/stablecoins up to 150% more than the value of the asset.
Terra users are rewarded by staking LUNA (native coin) in the ecosystem. Terra pays with a combination of taxes, commissions, and compute/gas fees. Taxes serve as a price for stability, and transaction fees of 0.1 to 1% help increase staking rewards for liquidity providers.
6. Cola Concealer
Terra works on the concept of Delegated Proof-of-Stake. This concept is a technology-based democracy using a consensus algorithm for the voting and election process. The purpose of using DPoS is to protect the blockchain from malicious or centralized use.
Terra uses DPoS to facilitate transaction approval and blocks being added to its ecosystem by validators. For any user to become a validator, they must have a huge amount of LUNA. But if they can’t, users can still participate in staking for passive rewards.
Terra uses GAS to facilitate the execution of smart contracts on its network. This is a way to reduce spam transactions, as well as a way to incentivize miners to continue fulfilling contracts.
The use of GAS is prominent on blockchains like Ethereum, as users even choose to pay higher GAS fees to ensure that miners push their contracts ahead of others on the network.
8. Community Based Management
On Terra, validators are given a say in decisions regarding important network upgrades. A network update can include anything about upgrades, technical changes, change in fee structure, etc.
The Terra governance method helps ensure consensus support when making a proposal on the network. It also allows the community to vote on proposals put forward by Validators for approval.
Terra phases (LUNA)
The use of LUNA consists of three steps.
- Bond MOON; this is the token stake stage. At this stage, the token continues to generate rewards for the validators and delegators that the token is linked to. Also, the tethered LUNA is normally locked down on Terra and will not be used for trading.
- Unbonded LUNA; these are tokens that have no restrictions. Users can transact with them just like with other tokens.
- unleashing; this is the stage at which the token cannot be sold, staked, or expected to generate any rewards. The unbinding phase lasts twenty-one days, after which the token becomes unbound.
Benefits of using Terra (LUNA)
There are many benefits to using Terra. The protocol is very functional due to its decentralized nature without access rights, which suits many players in the industry. In addition, everything related to payments, infrastructure and logistics is suitable for stablecoin and Dapp developers as it simplifies their work.
Other advantages of Terra:
Terra is easy to program for developers
It is easier for programmers to use Rust, AssemblyScript and Go to develop smart contracts. Also, they can rely on network oracles to improve the functionality of their Dapps. Oracles allow blockchain networks to easily discover prices for more functional transactions.
They collect real or off-chain data to facilitate smart contracts. Oracles bridge the gap between the outside world and blockchains. Terra allows programmers to create better Dapps through their network oracles.
Simplifies financial transactions
According to the founders of Terra (Luna), the network is aimed at simplifying transactions in the cryptocurrency market. The network works to reduce reliance on third parties such as banks, payment gateways, and even credit card networks.
Terra’s single blockchain layer allows users to easily perform financial transactions without high fees.
Terra simplifies interaction
The Terra network is a multi-chain protocol. It can seamlessly interact with other blockchains through Cosmos IBC. The protocol is a typical example of blockchain interaction. Blockchain interoperability refers to the network’s ability to see and access information across many blockchain systems.
This means that many decentralized networks can easily communicate with each other. Terra is currently running on Solana and Ethereum, and developers will be taking steps to work on other blockchains in the near future.
The Tendermint consensus keeps Terra alive. Tendermint secures its network with validators. Validators are responsible for consensus across the ecosystem and also run full nodes. They are responsible for transferring new blocks to Tendermint and earn a reward for this. Validators are also involved in managing the treasury. However, the influence of each validator depends on the level of their stakes.
On Terra, the number of validators must be at least 100, and only those who have made the reduction act as validators. If one of them does not appear online all the time or does not show double signs, they risk getting the LUNA they put on the platform. This is because the protocol may cut LUNA based on punishment for misconduct or negligence.
These are users who own the LUNA token, but do not want to become validators or cannot, even if they want to. These delegates depend on the terra station website to transfer their LUNA tokens to other validators for income.
Since they receive some of the revenue from the validators, they also receive some of the responsibility from the delegators. So if a validator is penalized for misbehavior and his/her token is slashed, the delegators also pay a portion of the fine.
Therefore, the best advice for delegates is to choose the target validator wisely. Also, if you can distribute your stakes across multiple validators on the network, it’s better than being dependent on one slow and careless validator. Moreover, if the delegator can track the actions of its validator, it will alert it when it needs to switch to a more responsible one.
Risk Reduction on Terra
This is a risk associated with the position of the validator on Terra. Given the importance of validators on the network, they are expected to act responsibly at all times to protect the system and their delegates. But when the validators don’t act or work as expected, the system lowers their rates on the network, affecting the delegators.
Three common logging conditions on Terra include:
- Node idle time; case of no validator response
- Double Signature: When a validator uses one chain ID at the same height to sign 2 blocks
- Many missed votes: failure to report weighted media votes in the exchange rate oracle.
Another reason for the slash is when a validator reports misbehavior from another validator. The reported validator will be “jailed” for a while and the network will also remove his/her staged LUNA after a guilty verdict.
There are many stablecoins pegged to various fiat currencies on the network. These stablecoins can be used for e-commerce payments. Each payment from Terra arrives in the merchant’s account in 6 seconds or less with a commission of 0.6% of the network.
If you compare these fees to regular credit card payments, you will notice a huge difference. If the first has only 0.6%, then the second has plus 2.8%. That’s why Terra is growing in its payments and revenue generated from payment processing.
For example, the network generated $3.3 million in revenue from processing $330 million in payments to many merchants.
Terra price stabilization
One of the ways stablecoins on Terra stabilize their prices is by following market demands to adjust their supply. Whenever demand rises, the price of terra stablecoin will also rise. But to stabilize the asset, the network ensures that supply meets demand by mining and selling Terra on the market.
This approach is known as fiscal expansion. Terra focuses on using market forces to stabilize its stablecoins. It uses an elastic monetary policy that changes quickly with any price deviations and imbalances between supply and demand in the market.
Stabilization of incentives for miners
In order for Terra to constantly stabilize its stablecoins, the network must provide adequate incentives for miners. Miners must stake their stake in LUNA regardless of prevailing market conditions. The reason is that in order for Terra’s price to remain stable, demand must be at a certain level, no matter how volatile the market is at that time.
This is why miners should be encouraged to continuously mine to mitigate the volatility that comes from rising LUNA prices. As such, miners have to bet constantly to keep the economy running. But for this, their incentives must also be stable, regardless of market conditions.
Fueling innovation with money
One of Terra’s driving forces is the ability to convert fiat currencies to LUNA. Luna also secures Terra and stabilizes it through profit-making price-fixing arbitrageurs, as they do in Terra & LUNA.
The balancing act usually requires an exchange of value between the currency and the collateral. Long-term collateral investors are Luna holders or miners who absorb short-term volatility in order to profit from mining and sustain growth.
Those who have stablecoins pay a transaction fee, and these fees go to the miners. Through this constant balancing act, Terra/Moon will continue to function. However, they should have enough value to make the action easier.
All about Terraform Labs
Terraform lab a South Korean company founded by Do Kwon and Daniel Shin in 2018. The company had $32 million in standby funding from Coinbase Ventures, Pantera Capital, and Polychain Capital. Using these resources, the company launched the LUNA stablecoin and created the Terra Network, a decentralized global payment network.
Terra offers lower transaction fees and completes the transaction within 6 seconds. Despite the fact that the system has not yet gained momentum in America and Europe, there are already more than 2 million Terra users. In addition, the network boasts $2 billion in transactions every month. Terra uses all South Korean platforms CHAI and MemePay to make transactions.
The uniqueness of LUNA lies in the fact that it returns to the holders all the proceeds from transactions. Most of these revenues transaction fees paid in the system.
Terra control is in the hands of LUNA holders. In addition, this system gives them the ability to force changes to Terra through consensus support for their proposals.
Community members are responsible for creating proposals and submitting them to the Terra community for consideration. Sometimes, when a community vote approves a proposal, it automatically applied. Furthermore, these proposals can often include changing blockchain parameters, adjusting tax rates, updating reward weights, or even removing funds from the community pool.
But when it comes to most issues, such as major changes in business lines or other decisions that require human input, the community will vote. However, the responsible person must submit a test proposal. He/she will create it, make several deposits to LUNA and reach consensus through the voting process.