March 9, 2023
6 min read
Terra Luna is a unique platform that offers a variety of stable coins in many local currencies. The idea behind it is that you want to use crypto currency as a payment system but most coins are not stable in price. Then there are stable coins but they are usually USD-based tokens which then makes it hard to transact in countries where dollars are not used. Terra Luna solves this problem by creating a digital currency for other national fiat-based currencies, to be used locally or used in international commerce. It makes it easy to shop using a digital currency or to send payments for international use. These transactions are handled by Terra. Luna is the main token that can be bought, sold, traded, and staked. We'll cover that later. For now let's get started on the history of this project and how it came about.
Terra Luna was founded in 2018 by Daniel Shin and Do Kwon in South Korea at Terraform Labs after receiving more than $32 million USD in investments. The idea behind the blockchain is to make payments in crypto currency more accessible and easier to make for everyone by creating localized digital currencies and pegging them to each other. For example, we know that there is Tether and it's USD-T, but paying in dollars does not help someone in, say for example, South Korea.
To solve this problem, a South Korean Won token was created for payments to be made in South Korea on the Terra token platform. The same goes for the Japanese Yen, the Euro and even special drawing rights. Here are a few more examples of what kind of local currencies that have been paired: TerraCNY, TerraJPY, TerraGBP, TerraKRW, TerraEUR, and the International Monetary Fund's TerraSDR. Now, let's get into how the tokenomics of the multi-token blockchain system works. Keep in mind we have Terra, which are used for fiat-pegged tokens, and we have Luna, the native token that can be bought, sold, and staked.
We talked a good bit about Terra and how it is used to create fiat-pegged digital currencies, but before we dive deeper into that, let's get into the mechanics of how Luna works and why there is great incentive to invest or stake your Luna tokens.
Luna, like Terra, was designed to maintain stability. Luna has an equilibrium limit set so that there can only ever be 1 billion Luna tokens at a given time. If there are more tokens, then the overage amount is burned to bring the number back down to 1 billion. If there are fewer than 1 billion Luna tokens,, then the missing amount is generated to top the number back up to 1 billion. The stability of Luna is transferred to Terra to maintain price parity with its fiat pair. Now, with some of the mechanics out of the way, let's jump into some historical price action.
Luna debuted on the market at the end of July in 2019 at $1.23 USD per token. It slowly declined from its debut price down to a low of $0.18 by May 2020. After hitting its lowest point, the price held steady for quite some time before starting to rise to $1.46 by the end of January 2021.
From that point forward, Luna finally established itself in the crypto market and investors started to take notice. The price shot up to $5.48 by 10 February 2021 and then climbed to just shy of $22 in March. By the end of May 2021 the price took a dive down to $5.40 by mid June and hung around there for a while. At the end of July Luna's largest ascent began. It went from around $7 at the end of July all the way up to $99.72 on Christmas day (25 December 2021). Of course there were peaks and valleys along the way but Luna was able to establish itself firmly in the market. A large pullback occurred in February 2022 when the price plummeted to $50 before rocketing upwards again and setting an all time high on 9 March 2022 at $101.59. Currently, at the end of March 2022, the price is hovering around $95 and shows strong signs of support to hold or surpass those levels.
Keep in mind, Atomic Wallet does not offer investment advice and highly recommends doing your own research before making any investments of your own.
Now onto one of the most important questions you can ask, is what's in it for me as a staker? Followed by, what mechanisms are in place to keep the ecosystem tied together and operating?
Terra Luna works on the Proof-of-Stake (PoS) concept, where you stake your tokens for a chance to become a validator and validate blocks of transactions. You are then rewarded for your validation. These rewards come from the small transaction fees that are charged to users to transact with Terra Stable coins and Luna. The Luna protocol has a limit that only permits the top 130 validators to participate in a consensus. At the end of the consensus, validators will have either agreed to pass or deny the block of transactions.
Terra's stablecoins are algorithmic stablecoins. So they are programmed to always be balanced. So, for example, the value of 1 Terra UST is equivalent to $1 USD and should remain stable due to the Luna token. So let's say, when the Terra UST drops below $1 USD, the Luna token supports the UST supply to help it maintain its peg to the dollar. The value from the Luna token is transferred to the UST to help offset the loss and then boost up the price back to parity.
Let's look at it like a cycle. Users transact, fees are taken from those transactions and put back into the ecosystem. This goes into Luna. Then if any of the stable coins lose value, value from the Luna tokens is transferred back into the Terra fiat tokens.
In the world of crypto there are always going to be fees. Fees are what drive the rewards for stakers and maintain ecosystems. While no one likes to pay fees for transactions, they are necessary. In the case of Terra, the fees are low as compared to the first generation crypto currencies such as Bitcoin and Ethereum, which are all now suffering from high fees due to network congestion.
Terra's blockchain has a six-second average block time. As mentioned before all transactions on the Terra network pay fees. For transactions involving Terra stablecoins, extra fees are added on top of the gas fees to maintain stability and discourage foreign exchange arbitrage. The most common type of stablecoin fee, the stability fee, is added onto all non-market swap stablecoin transactions, and fees can range from 0.1% to 1%, hard-capped at 1 TerraSDT. Spread fees are market swaps that involve stablecoins and Luna. The minimum fee is set to 0.5% and may fluctuate when there is market volatility. For market swaps between stablecoins, a "Tobin tax" is applied by on-chain governance. Most market swaps will incur in .35% tax, and some stablecoin pairs have had to pay as much as 2%. While it may seem like there are lots of fees, you will still encounter these kinds of fees at fiat currency exchanges or if you want to convert and send money to another country there will be extra fees to send. However, the fees assessed on the Terra platform are still going to be less than going down to your local currency exchange.
Now, let's get a bit more technical on Luna's blockchain fundamentals.
The Luna Terra blockchain is blockchain agnostic meaning that it was not derived from another blockchain such as Ethereum with its well known ERC20 tokens that are interoperational with other ERC20 tokens. While this might sound like a disadvantage, it is not. In the current state of development, the Luna Terra Blockchain is inter-blockchain operational with Ethereum, Solana, and the Biance Smart Chain (BSC)and has more integrations planned for development.
Below are some of the technologies used that allow for this inter blockchain operation:
With the above protocols and technologies in place the Luna Terra Blockchain allows for easy transfers from one crypto to another.
Now if you decide that Luna is the right crypto currency for you, you are going to need a secure place to store it. Look no further than Atomic Wallet!
Atomic Wallet offers you a great place to store your Luna tokens. Besides just being a wallet for storing, sending, and receiving, you can do much, much more with Atomic wallet. Atomic Wallet has some great features such as having a built in decentralized exchange/swap where you can buy more than 300 crypto currencies and have them securely stored in your Atomic Wallet. What's more is that you can stake a number of tokens right in the Wallet! On top of that, for each transaction you make in Atomic Wallet, buying, selling, or swapping, you are eligible to get up to 1% back per transaction paid out in Atomic Wallet's native token, AWC.
Stable coins or tokens are usually tied to a fiat counterpart that represents that fiat currency in the digital world. They were designed to maintain stability to create crypto currencies that could be used for reliable payments. This is due to the fact that many crypto currencies are volatile and prices fluctuate too quickly to provide reliable payment.
When you see that a token is designated as an ERC20, that means that it was created from Ethereum and is easily exchangeable with other tokens. On the downside, since gas fees are so high right now, due to the expanded use of Ethereum, it means if you transact with Ape coin you will need to pay a high gas fee to do so. This should hopefully be mitigated once Ethereum is updated to 2.0 and a proof of stake validation method.
Terra Bridge is a platform to allow for exchanges between different blockchains. Right now it supports Ethereum, Biance Smart Chain transfers to and from Terra.
Terra Wormhole is another platform that allows for interchain transfers to and from Terra to Ethereum and Solana. In addition to inter-blockchain transfers. It also allows for NFT buying and selling.
Staking is a way to earn rewards on your crypto holdings. Think of it like putting your money away in a certificate of deposit at a bank. Once you invest your money, it is locked in the fund for a time period several months to a year or more and you get interest paid back on your money. The same goes for staking, you lock your crypto away for a certain time period and then are rewarded with crypto interest payments.
Learn more about what Atomic Wallet has to offer on the official website.
Learn more about the status for each crypto currency that Atomic Wallet has on the asset status page.
Learn more about crypto currency on Atomic Wallet's Academy.
Explore all the great features of Terra-Luna on the official website.
Learn how to build and integrate into the Terra-Luna blockchain at the Terra-Luna Academy.
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