What is Terra LUNA? Terra blockchain LUNA crypto explained

What is Terra LUNA? Terra blockchain LUNA crypto explained
7 min read
1 year ago

NFTs, DeFi and Stablecoins, have all been blowing up in popularity which is great! But it means the Layer 1 blockchains, which provide the underlying architecture for all of these applications, have recently been booming in price.

A good Layer 1 blockchain should be fast and cheap to use, full of original and disruptive decentralized applications, and offer positive token economics for holders of the platform’s native currencies.

Perhaps this goes some way to explaining why the Terra blockchain has been one of the fastest growing Layer 1 protocols this year!

Terra was founded in January 2018 by Korean company “Terraform Labs”, and its principal aim is to provide a one-stop ecosystem of decentralized, programmable money that can easily be exchanged or staked for a stable yield.

Terra is powered by the Terra LUNA coin, which helps stabilize the price of Terra’s stablecoins whenever they rise above or fall below their respective “pegged price”.

The Terra LUNA token was launched in July 2019, and has since been followed by 15 other stablecoins, including TerraUSD, TerraGBP, TerraEUR, and TerraCNY. The most widely circulated of these coins is Terra’s USD coin, which is the most used stablecoin in Terra’s DeFi ecosystem.

Similar to how DAI works on the Maker protocol, Terra’s stablecoins work together, with the LUNA token being burnt or minted in response to market supply and demand. This means Terra's stablecoins are algorithmically-designed to stay at the same price regardless of what is happening in the market, and without centralized interference.

As stablecoin usage on Terra increases, users who stake Terra's native LUNA token receive more fees.

LUNA is a non-inflationary currency and considering that the LUNA token is also needed for minting stablecoins, this probably explains why increased usage of the Terra blockchain has equated to LUNA outperforming many assets in 2021.

However, one thing to bear in mind about stablecoin platforms in general is that they tend to attract the attention of government regulators, who might see decentralized currencies as a threat to either their current economic model, or to their future hopes of launching a government-controlled CBDC.

In fact, documentation shows Terra CEO Do Kwon, a resident of South Korea, was served with a subpoena at the Messari crypto conference which took place in New York in September 2021. Kwon and Terraform labs are now counter-suing the SEC, claiming that Kwon, as a South-Korean citizen, does not fall under US jurisdiction. And also that approaching Kwon with a subpoena at a public conference was “an intentionally brazen display meant to publicly intimidate and embarrass” the CEO.

Actions like this from the SEC may create a chilling effect on crypto innovation, but it does also demonstrate the real need for decentralization in crypto, and Terra seems to be way ahead of the game in that regard. One thing that Terra’s stablecoins have over Ethereum’s DAI coin, at least in the short term, is their scalability. The Terra ecosystem is completely designed around stablecoins, as opposed to many computationally-heavy projects. Terra also offers near instant and feeless on-chain swaps between currencies, and hosts an array of disruptive dApps that allow stablecoin holders to make the most of their savings.

Terra is famous for its stablecoins,   but it’s also one of the fastest growing  dApp ecosystems in the crypto space. The co-founder of the Terra project, Do Kwon,   recently stated that more than 60 projects are  preparing to launch in the next month or so,   and more than 100 other projects have declared  plans for the end of this year or early 2022.

But here we’re going to give you the lowdown  on 4 of Terra’s most interesting, O.G dApps   that play a key role in the ecosystem.


Let’s start with Anchor, it’s a protocol   that enables Terra to provide users with  savings accounts, lending opportunities,   and most impressively, the opportunity to earn  a fixed 20% rate of interest on their crypto. This feature is particularly novel in a  space dominated by variable savings accounts   that are affected by market volatility and is  achieved by balancing out the token yields of   all of the assets staked as  collateral on the Anchor platform.

To put it more simply, Anchor uses the blockchain  and some ingenious mathematics to effectively “set   the benchmark interest rate” for the crypto space,  much like central banks do in the world of fiat,   except in a trustless manner that doesn’t rely on  the interference of a committee of individuals.

Anchor’s open source code can also be easily  integrated into other applications across the   internet, meaning it’s potential for mass adoption  across the upcoming metaverse is almost limitless. 


Mirror brings Synthetic or “Mirrored assets”  to Terra, which are tokenized representations   of non-native assets, like company stocks  and cryptocurrencies from other blockchains. This gives traders around the world  exposure to a broader class of assets,   without having to leave the  permissionless environment of crypto. As of November 2021 there is 1.66 billion UST  worth of value locked in the Mirror protocol,   making it a direct competitor to  Ethereum's Synthetix platform,   which launched a full 3 years prior to Mirror.


Terraswap is the main exchange on  the Terra blockchain, enabling fast   on-chain swaps of stablecoin  assets for negligible fees. Using the Automated Market Maker  model familiar to users of Uniswap,   Terraswap helps to bring on-chain  liquidity to the platform,   and rewards liquidity providers with the trading  fees collected from their respective pools.

Terraswap supports assets native to  these key dApps like Anchor and Mirror,   therefore providing an important  piece of DeFi lego for the platform. 

Wormhole acts

And finally, Wormhole acts as a bridge between  Terra and other blockchains or DeFi networks and   provides users with a unified interface through  which they can exchange crypto assets and NFTs. The Wormhole Token Bridge connects  Terra with Ethereum, Solana,   and Binance Smart Chain, with  Polygon still to be added. This application puts Terra in a  central position of the crypto world,   and ensures that it will be part of  the cross-chain future of crypto. 

Kelly 3.2K
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