What is Terra?
Terra, officially launched in April 2019, is a blockchain protocol that uses fiat-pegged stablecoins to power stable-price global payments systems.
Fiat-pegged cryptocurrencies are coins, tokens, or assets issued on a blockchain that is linked to a government or bank-issued currency.
Each pegged cryptocurrency is designed to always have a specific cash value in reserves.
Priced at US$43 on 2 November Terra had a market cap of US$17bn and a circulating supply of 400 million coins.
Terra combines the price stability and wide adoption of fiat currencies with the censorship-resistance of Bitcoin (BTC) and offers fast and affordable settlements.
As of September 2021, it offers stablecoins pegged to the US dollar, South Korean won, Mongolian tugrik, and the International Monetary Fund’s Special Drawing Rights basket of currencies.
Terra’s native token, LUNA, is used to stabilise the price of the stablecoins.
Who founded Terra?
Terra was founded in January 2018 by Daniel Shin and Do Kwon, who conceived the project to drive the adoption of blockchain technology and cryptocurrency through a focus on price stability and usability.
Kwon took on the position of CEO of Terraform Labs, Terra’s parent company.
Before founding and being CEO of Anyfi, a startup providing decentralised wireless networking solutions, Kwon also worked as a software engineer for Microsoft and Apple.
Prior to developing Terra, Shin co-founded Ticket Monster (a major South Korean e-commerce platform) and Fast Track Asia (a start-up incubator working with entrepreneurs to build fully functional companies).
How does Terra work?
Terra is unique by using fiat-pegged stablecoins to combine the benefits of cryptocurrencies with the day-to-day price stability of fiat currencies.
The blockchain and crypto platform started its development in January 2018, with its main-net blockchain going live in April 2019.
Since then, it has grown to become the 12th largest cryptocurrency by market cap and at around US$49.10 presently is worth around US$19.5bn.
It keeps its one-to-one peg through an algorithm that automatically adjusts stablecoin supply based on its demand.
It does so by incentivising LUNA holders to swap LUNA and stablecoins at profitable exchange rates, as needed, to expand or contract the stablecoin supply to match demand.
Each transaction is subject to (on average) a 2%-3% fee charged to the merchant.
Terra is supported by the Terra Alliance, a group of businesses and platforms advocating for the adoption of Terra.
In February 2019, the company announced that e-commerce platforms from 10 different countries, representing a user base of 45 million and a gross merchandise value of US$25bn, were members of the alliance.
Why was it created?
The creators of Terra, Daniel Shin, and Do Kwon, wanted to create coins that have less volatile pricing than cryptos like Bitcoin, but still have plenty of room for growth.
Terra’s stablecoins achieve price stability through collateralisation – using Luna – in a similar mechanism as fiat currency once did by using an underlying asset such as gold.
For example, Luna could be held as a reserve for the issue of crypto-backed stablecoins.
Who uses Terra luna?
Terra has established several partnerships with payment platforms, particularly in the Asia-Pacific region.
It has some 2mln active users in South Korea and 40,000 active users in Mongolia.
Why is it an alternative to bitcoin?
Terra handles volume. Transactions involving all Terra stablecoins currently make it the 3rd largest by crypto by volume, behind only Bitcoin and Ethereum.
Each transaction pays a small fee to Luna stakeholders, in effect, it means the group of Terra holders that have staked their crypto earn further crypto assets from the transactions that take place.
This elevated class of Luna holders are also key decision-makers in Terra protocol, meaning they assist in the running of the platform.
Such stakeholders have a say in blockchain governance, propose and vote on changes in monetary.
Luna can still be prone to erratic changes in price though it’s seen less frequently than Bitcoin.
How many Terra coins are in circulation?
Terra has a supply of 1 billion tokens, and if exceeded, LUNA is burned until it returns to the equilibrium supply level.
New LUNA tokens are minted through the protocol’s algorithm in order to maintain the price of Terra stablecoins.
Minting is the process of validating information, creating a new block, and recording that information into the blockchain.
LUNA was first made available for purchase in a private token sale in August 2018 for initial investors, which included major exchanges such as Binance, and OKEx and raised Terra US$32mln.
Of the 385 million LUNA minted for the sale, 10% was reserved for Terraform Labs, 20% for employees and project contributors, 20% for the Terra Alliance, 20% for price stability reserves, 26% for project backers, and 4% for genesis liquidity.
How Is the Terra Network Secured?
The Terra blockchain is secured using a proof-of-stake consensus algorithm, in which LUNA token holders stake their tokens as collateral to validate transactions, receiving rewards in proportion to the amount of LUNA staked.
Token holders may also delegate others to validate transactions on their behalf, sharing any revenue generated.
In May 2019, blockchain verification and penetration testing firm CertiK completed a security audit of the network by examining its economic model to test against market manipulation, its architecture, and its coding language.
CertiK found that the “modeling and mathematical reasoning” of the Terra network were “considered sound,” although it would not comment on the blockchain’s performance.
Where Can You Buy Terra (LUNA)?
Terra’s native token, LUNA, is listed on several cryptocurrency exchanges including Huobi, Bitfinex, and Upbit where it is available to be traded against fiat currencies, stablecoins, and other cryptocurrencies.
