Does Terra (LUNA) Still Have a Good Use Case in a Bear Market??

By Michael @ CryptoEQ | CryptoEQ | 25 Jan 2022


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Terra is an algorithmically-governed, decentralized, and seigniorage share style stablecoin-creator network and platform that involves a basket of fiat-pegged stablecoins ($UST, pegged 1:1 to the USD, and others) and the native token Luna.  Seigniorage refers to when profit is made by issuing currency in regards to the difference between its face value vs the cost of its production.

Terra was created by Terraform Labs to meet the fiat and blockchain markets’ demand for a decentralized, price-stable money protocol.  Terra was created to be both price-stable and growth-driven, able to achieve price-stability via an elastic money supply, enabled by stable mining incentives. As Terra is minted by its minting operation as a transaction stimulus, great adoption occurs. 

 

The Terra protocol with its balance between fostering stability and adoption targets these use cases to be a complement to fiat currencies as a means of payment and store of value: 

 

  • Maintain a stable price to be effectively usable as a currency or medium of exchange, while retaining all of the censorship resistance properties of Bitcoin

  • Implement network effects and strong user incentives in the protocol to promote greater adoption of the currency

Terra can be thought of as building the “legos” that power and connect an economy that is truly decentralized. There are applications built on Terra today that are used for payments, for bridging traditional finance to crypto, and to serve as baskets of stablecoins for various markets.

The primary product of the Terra ecosystem therefore can be thought of as the basket of stablecoins, while Luna is the byproduct of this adoption and success of the entire ecosystem. As more protocols, applications, and users use UST and the other affiliate stablecoins, the Luna token will absorb the value from these activities, ultimately benefiting validators, delegators, and holders of the Luna token.

Terra aims to facilitate mass adoption of cryptocurrencies and digital assets by supporting token algorithmic stablecoins which maintain price parity with fiat currencies (such as USD, EUR, CNY, GBP etc). Users mint new stablecoins on Terra by burning Luna tokens and thereby reducing the available supply of Luna. Luna holders can earn staking rewards and participate in network governance. 

Terra is a blockchain inside of the Cosmos IBC (Inter-Blockchain Communications Protocol) which allows both fungible (cross-chain payments) and non-fungible token transfers with some of the biggest blockchain ecosystems in crypto.

The Cosmos IBC allows reliable, ordered, and authenticated communication between different sovereign, heterogenous blockchains. Terra is therefore interoperable with other major blockchain ecosystems in crypto today - namely Ethereum, Binance Smart Chain, Solana, Polygon, Fantom, Avalanche, and others via a cross-chain bridge.

A primary use case of Terra is lower transaction fees on payments. CHAI, a mobile payments app utilizing Terra as a settlement layer for transactions within the app, saw approximately a quarter of a million users over the past 90d period.

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Michael @ CryptoEQ
Michael @ CryptoEQ

I am a Co-Founder and Lead Analyst at CryptoEQ. Gain the market insights you need to grow your cryptocurrency portfolio. Our team's supportive and interactive approach helps you refine your crypto investing and trading strategies.


CryptoEQ
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