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Terra (LUNA)

Terra is a blockchain built on Cosmos whose goal is to create a network of decentralised stablecoins. Earlier this year the project raised $150 million from a handful of major crypto investors.

The top two stablecoins (coins that follow the price of fiat currencies), USDT & USDC, are centralised, which poses a threat to the stability of crypto. Terra’s biggest stablecoin is TerraUSD (or UST for short).

What is Terra trying to do?

Terra’s goal is to combine the price stability of fiat with the pros of cryptocurrencies, such as fast transactions and low fees. They want to be the leading facilitator of crypto-based e-commerce transactions and provide a secure and algorithmic stablecoin for use within crypto. They are already a success in Asia and now intend to move to the rest of the world.

What is LUNA?

LUNA is the native asset of Terra. It’s used to stabilise the price of the stablecoins in the Terra ecosystem. When 1UST is created, $1 worth of LUNA must be burned. The opposite is also true for the redemption process of UST and other stablecoins on Terra. LUNA also acts as a last resort to bring back stablecoins to peg should they lose it.

How do Terra holders benefit?

LUNA holders can stake their tokens to validate transactions. In return, they receive rewards. LUNA holders can also vote on proposals which also classifies it as a governance token.

What about the price?

Given that LUNA is burned when new stablecoins are pushed, there is a direct supply reduction which, in theory, helps its price appreciate.

Disclaimer: THIS IS NOT FINANCIAL NOR INVESTMENT ADVICE. Only you are responsible for any capital-related decisions you make, and only you are accountable for the results.

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