Alright, before you jump into conclusions that “LUNA is a failed project & a scam”, or “Do Kwon is an egoistic bastard who deserves to be in jail” or anything similar to those accusations, one thing that we should remember is that:

The cost of failure is … learning. - Neil Strauss

I think most of you have known the flawed economic mechanism of the Terra Luna’s undercollaterized UST stablecoin & the LUNA coin. However, despite its flaws, there are a few positive things about the unique DApp & DeFi growth in the Terra Luna ecosystem that I think it’s worth covering.

If you have never participated in the Terra Luna ecosystem before reading all the negative headlines about Terra Luna & Do Kwon, this is the article for you. I have covered in my previous stablecoin article about how I lost a portion of my crypto holdings in UST, and today I’m going to share some of my reasons of why I rooted their ecosystem to succeed before (no, 20% UST yield in Anchor Protocol is not the spotlight), and what other blockchains & DApps can learn from them.

1) Using stablecoins (or LUNA) to pay fees

We all are used to paying fees using the respective native cryptocurrency (such as BTC in the Bitcoin blockchain & ETH in the Ethereum blockchain), but Terra is unique in a way that you can choose not just to pay fees in LUNA or UST, you can pay fees in other fiat-pegged stablecoins such as:

• TerraCNY (Chinese Yuan)

• TerraJPY (Japanese Yen)

• TerraKRW (Korean Won)

• TerraEUR (Euro)

• TerraGBP (British Pounds)

• TerraMNT (Mongolian Turgik)

and many more. Furthermore, since you’re paying fees in multiple stablecoin options, you’re eligible to earn LUNA, UST & other stablecoins mentioned when you stake with a validator.

This is a great option if you don’t want to sacrifice your LUNA & UST profits to pay fees. Likewise, it’s also more newcomer friendly as the non-crypto people are more familiar to paying for things in USD, and UST is the closest currency to a USD, so it’s easier to attract newcomers into the ecosystem. You can watch this video to see how the Terra wallet works.

So far, I don’t see any blockchains that offer fee payments in stablecoins, except for Ergo blockchain which has already implemented Babel Fees, where you can pay transaction fees in any native tokens, such as SigUSD. You can refer to another simpler explanation on how Babel fees work.

Paying fees in another native token will be revolutionary in the future, especially when it comes to countries adopting blockchain technology where all money transactions & fees can be paid in their respective countries’ fiat currency. Imagine paying for your local kopi (coffee) for RM2 in Ringgit stablecoins & paid a few sens in transaction fees. It’s exactly like how you normally pay for things, but in a blockchain environment.

2) Recognizable & Easily Understandable DApp platforms

Let’s take an example when a newcomer wants to deposit their stablecoins into a lending platform to earn some yield.

Just take a look at Anchor Protocol from Terra. If you’re looking to earn yield from your UST, it’s very simple & straightforward to understand especially for a newcomer. If you want to earn yield, just deposit your UST. If you want to withdraw your UST, just click withdraw. You can also toggle the rewards you’ll be earning per day, week, month & year. Simple and straightforward indeed.

Now, let’s look at Aave Protocol, one of the most popular lending & borrowing platform in Ethereum. Newcomers are not used to the word “supply” as they are more used to “deposit” because normally, people will say they deposit their money into a bank account, and not supply their money. Another confusion they may see is there are two different APY columns and they may not instantly know what those mean if they do not read the docs.

Similar with Compound Finance, another popular lending & borrowing platform in Ethereum. Again, supply is the word they use as this term is already the norm in DeFi, but not for non-crypto newcomers. Last but not least, there are new terms that newcomers need to learn, such as collateral value, liquidation point, borrow capacity and protocol balance to name a few.

Wording may sound simple, but if you’re going to put large amounts of money into these DeFi platform, you cannot afford to misunderstand these terms. Minimal buttons and easy to understand terms to navigate a DeFi platform are essential for new user adoption, and Terra DApps such as Anchor Protocol are doing just that. Other platforms such as Mirror Protocol which was used to trade synthetic stocks (such as tokenized TSLA, MSFT, GOOGL, etc), was also easily relatable to the US stock market trading platforms as you’re buying those assets with your UST stablecoins like how you would trade stocks in TD Ameritrade, IBKR or Fidelity.

Thus, the lesson learnt is to create a DApp which has a recognizable UI as the TradFi platforms, while keeping the terms simple & straightforward that non-crypto users can also understand with minimal details to explain how the platform works, though it’s arguable if the DeFi platform has features that are unique and more revolutionary than TradFi will need unique ways of explaining especially to 70-year-old non crypto grandma on how it works in a very simple manner.

3) Using UST stablecoin as the main token to power not just DeFi, but for other utilities too

What made UST standout against other stablecoins like USDT & USDC was that the UST stablecoin was utilized vastly, not just to hedge against crypto volatility, paired with other cryptos for liquidity, or used in DeFi, it was planned to be used for other real-world use case such as:

• Pay transaction fees in UST

• Buy synthetic stocks (Mirror Protocol)

• Buy tokenized real trees (Orne)

• Gateway to make payments in UST (Kado, now converted to fiat on/off ramps)

• Funding towards charities & non-profit organizations (Angel Protocol)

Although these types of platforms were either migrated to the Cosmos blockchain or not existed already, using stablecoins to participate in DeFi, normal day-to-day payments, donations and buying useful NFTs in recognizable fiat value like these platforms mentioned can be the key to transition new non-crypto users into using blockchain technology in a permissionless manner.

Moreover, utilizing fiat stablecoins in real-world use cases is crucial especially if we want to transition the majority of economic activity into the blockchain world, with at least more than 99% of economic activity is still heavily reliant in transacting in fiat currencies. The introduction of Terra may inspire the possibility for this concept of using UST for economic activity, but sadly it’s been utilized too heavily on unsustainable DeFi mechanisms, which is why blockchains that utilizes stablecoins alongside their native currency would potentially bring more businesses from the real world into blockchain.

Summary & My Thoughts

Unlike many of you who may learn your trade & participated in DeFi on Ethereum or other layer-2 EVM blockchains, Terra is one of the blockchains where I learn most of my DeFi knowledge from, despite also having to play around in many blockchains such as Ethereum, Cardano, Binance Smart Chain, Avalanche & many more. Even though many DeFi platforms & terms in Terra are originally derived from Ethereum, Terra has more familiarity at least for a person like me who wanted to use blockchain & DeFi that was valued in a currency that I’m familiar with (which is the USD), while also enjoyed much cheaper fees & faster transaction finalities than Ethereum’s PoW blockchain.

Even though the biggest blockchain mainly powered by a stablecoin had fallen, I hope that other blockchains may adopt the philosophy of using stablecoins as an option alongside their native currency to pay for transaction fees or being utilized in many real-world use cases besides being mainly used as a hedge against crypto volatility. One of the problems that we currently see in the Ethereum & other EVM world are the heavy reliance on the two biggest stablecoins (USDT & USDC) in the majority of the DeFi apps, which brings many centralization risks.

A hybrid of collaterization & algorithmic stablecoins such as Cardano’s DJED, Ergo’s SigUSD and FRAX are promising in maintaining the dollar peg while decentralizing the collateral backing from thousands of entities & normal users. Combining with interoperability features, the list of collateral backing these stablecoins can also be expanded to multiple blockchains. In fact, Terra is also best suited for this because it’s developed using Cosmos SDK and is already interoperable by default. In my opinion, if Terra followed a similar model with more sustainable economics and well-managed by a more mature team, more blockchains may root for UST’s success.

However, with UST failure causing a slur of big hedge funds, centralized entities & banks failing one-by-one, resulting in serious US crypto regulatory crackdown, we need to think long and hard about developing more resilient & decentralized stablecoins, or else we will continue be hindered by regulations for a long time.

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