Luna terra coin explained

The Terra LUNA coin has seen its price soar since the start of the year, reaching a new all-time high at the start of October. But the complex nature of the coin has led many people to question how it actually works. The founding team was headed by entrepreneur and investor Daniel Shin, who graduated from Wharton School of Economics and founded HOF, a fintech portfolio company. LUNA launched in and is now one of the most successful decentralised finance coins. CoinMarketCap has currently ranked it the 11th largest by market capitalisation. The aim of the Terra blockchain is to create stablecoins , tokens designed to combine the decentralised freedom of cryptocurrencies with the stability of fiat money.

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WATCH RELATED VIDEO: Terra LUNA explained in under 5 minutes. (cryptocurrency)

Ethereum Rival Terra Hits Another All-Time High as It Enters Top 10 Coins

Price volatility in cryptocurrencies is well known by anyone involved in the markets and ecosystems that have been created by the invention of the blockchain and cryptocurrencies. Because of the set issuance schedules and speculative demand nearly all cryptocurrencies see wild price fluctuations. This price volatility has been a hinderance in gaining adoption for cryptocurrencies as a medium of exchange or as transactional currencies.

This problem is made worse when deferred payments are involved like mortgages or employment wages. Using the current volatile digital currencies in these cases is prohibitively expensive and unreliable.

There are some projects working on a resolution to this issue, and one of them is the Terra Protocol. It uses an elastic monetary policy to create price-stable cryptocurrencies that are pegged to a variety of fiat currencies. The Terra Protocol is an innovative approach to cryptocurrency volatility. Image via Terra blog. Currencies have well known network effects. This is one explanation for the lack of mainstream adoption of Bitcoin as a transactional currency.

The team at Terra Protocol believe that an elastic monetary policy is the solution to stability for cryptocurrencies, and that a strong fiscal policy can drive adoption of new cryptocurrencies.

So they are creating an efficient fiscal spending regime, managed by a Treasury, with multiple stimulus programs competing for financing. That is, proposals from community participants will be vetted by the rest of the ecosystem and, when approved, they will be financed with the objective to increase adoption and expand the potential use cases.

The Terra Protocol with its balance between fostering stability and adoption represents a meaningful complement to fiat currencies as a means of payment and store of value. Terra is a blockchain protocol that develops and supports stable payments and open financial infrastructures.

The entire protocol is supported by a basket of seigniorage style stablecoins pegged to various fiat currencies. All are stabilized algorithmically by the native asset of the blockchain, the LUNA token. Image via CoinCodex. By releasing fiat pegged stablecoins Terra is one part digital central bank.

Another part of the system helps replace the current complicated and expensive payments chain that includes banks, payment gateways, and credit card networks. Terra is thus providing efficiencies for merchants and consumers, while continually improving on the infrastructure and tools of the ecosystem to eventually reach a transparent, distributed, credibly neutral payments system.

The project is already boosting mass adoption through its partner system CHAI, a South Korean payments gateway that already has over 2 million users. Using that as a springboard the team hopes to create a more widespread system by moving into other areas of Asia.

LUNA is the native token of the Terra network, used for staking to secure the network, governance, and collateralization for the price-stability of the stablecoins. LUNA is in essence the backbone and foundation of the entire Terra network and ecosystem. The primary purpose of LUNA is to protect the network by locking value in the Terra ecosystem though a staking mechanism. Users can stake LUNA tokens for rewards. Staking rewards are distributed first to network validators, who take a small commission for themselves before passing along the rewards to individual delegators.

The size of those rewards are determined by the size of the stake. They also increase as the transaction volume in the network increases, since part of the staking rewards come from transaction fees. As of mid-February The staking rewards come from transaction fees or gas , taxes on transactions, and seigniorage rewards.

The validator group sets the minimum gas price and any transactions with implied gas price above this minimum are rejected. At the end of each block the gas fees are released to the validators. The protocol charges a small tax that ranges from 0. These are implemented as a stability fee and can be paid in any Terra currency. The taxes are also disbursed to validators at the end of each block.

The group of validators can participate in the exchange rate oracle process and they collect rewards from the seigniorage pool each time their vote falls within the reward band.

The three bonding phases of LUNA. Unbonded — Luna that can be freely transacted as a regular token, with no restrictions. Bonded — Bonded LUNA is considered staked, and while it is bonded it continues to generate rewards for the validator and delegator it is bonded to. When bonded LUNA cannot be freely traded and remains locked in the ecosystem.

The unbonding period lasts 21 days and during this time there are no staking rewards, nor can the LUNA be freely traded. After the 21 day unbonding period the LUNA is considered to be back to the unbounded state. Terra is powered by Tendermint consensus, which relies on a set of validators to secure the network.

Validators run a full nodes and work to provide consensus for the network. They commit new blocks to the blockchain and are compensated for their work by receiving rewards. They also participate in the governance of the treasury and their voting influence is based on the total amount of their stake, including delegations. Only the top validators with the most weight will be active validators.

Delegators are LUNA holders who either choose not to become validators, or cannot for some reason. Delegators use the online Terra Station website to delegate their LUNA tokens to a validator, and in exchange they receive a proportional amount of staking revenue. Current staking returns as shown at Terra Station. Because delegators share in a portion of the revenues from staking they also share in a portion of the responsibilities of the validators. That means when a validator misbehaves and is slashed, the delegators are also slashed in proportion to their stake.

This is why delegators need to choose those they delegate to wisely, and should always spread their stake across multiple validators. Because delegators are responsible for choosing validators they provide a crucial function within the network. Although it may seem like delegation is passive, it is not. Delegators need to remain aware of the actions of the validators they are delegating to, and be ready to switch whenever the validator is not acting responsibly.

Validators have a large responsibility in the network, and because the number of validators is limited to there are liveness and safety guarantees to be met. Validators risk having their stake and those of their delegators slashed if they are unable or unwilling to meet these guarantees. In addition to staking rewards there are some risks. Image via Chorus. Validators are also responsible for watching their peers for misbehavior and one validator is capable of submitting evidence of misbehavior of another validator.

Terra includes a number of stablecoins that are pegged to fiat currencies and are used for e-commerce payments. Terra network payments are posted to merchant accounts within 6 seconds, and there is a small 0. That compares quite favorably with the current credit card networks who have a 7-day settlement period and charge 2.

Terraform Labs created Terra Money. Image via Steemit. Those revenues are paid out as staking rewards. In the case of rising demand the supply of the token needs to increase as well to offset that demand. This is known as fiscal expansion. The protocol handles this by minting and selling Terra to increase the market supply of the token. Terra is simply taking advantage of efficient market forces, where arbitrageurs step in to collect risk-free profits by purchasing the newly minted TerraSDR currently worth more than the peg for 1 SDR of LUNA and then selling it immediately for a profit.

This mechanism is known as seigniorage and represents the profit gained from minting Terra and it costs next to nothing to mint! The mechanism for maintaining the Terra peg. If the price of Terra falls below the peg the supply of Terra needs to be reduced to maintain the peg. The falling value is thus absorbed by LUNA holders and as the Luna supply is diluted, the value is transferred from the Luna collateral to raise the price of Terra. So, this is the basic mechanism used to maintain price stability in Terra.

The price stability of Terra does require a base level of demand for the token to persist despite any extreme volatility.

This is because the entire system fails if there is a drop in the total value of all LUNA that makes it impossible to hold the Terra peg. Terra maintains its price stability due to the stability in mining demand because the miners help to absorb the volatility through the price changes in LUNA.

This means miners must remain incentivized to stake LUNA during all market conditions. Staking has to be a long-term commitment to maintain the economy. However, there is inherent volatility in unit mining rewards, since miner reward is directly correlated with economic cycles of the Terra economy — the more transactions, the more you make in transaction fees. Miners must remain incentivized to keep the economy functioning. When mining rewards increase in volatility miners become more reluctant to maintain their stake because it is increasingly difficult to determine if the staking will remain profitable or not since staking requires LUNA to remain locked for a long period of time, and the unbonding process takes 21 days.

The way to eliminate miner uncertainty is by ensuring mining rewards remain stable and unaffected by market conditions. So in addition to the price stabilization mechanism there is also demand stabilization for LUNA to help counteract any volatility due to macroeconomic trends in the Terra economy.

Miners are more comfortable making a long-term commitment to staking if they know there is a predictable, stable profit rather than volatile rewards. Luna also stabilizes Terra through the action of arbitrageurs who resolve price differences when they act to extract profits.

The balancing act involves exchanging value between currency and collateral. Terra holders pay transaction fees to miners for them shouldering the price changes. This system continues to work if there is enough value in Terra or Luna to continue the momentum of the balancing act.

More partners means more growth for the Terra network. As more businesses agree to accept Terra stablecoins the value of the entire network will grow.

Over time fees will also improve. The value in LUNA is maintained by encouraging staking with stable mining rewards with assured growth. The founders of Terra.

LUNA for Noobs

The price of LUNA cryptocurrency since the early trading hours is exhibiting very little volatility as the buyers are negligible while the sellers remain passive. The price is rallying towards the next resistance level yet eliminating the possibilities of a pullback. The technicals also stand strong today and therefore the Terra LUNA may experience a notable price change in the next couple of hours. Terra crypto remained distinct from mainstream adoption ever since its inception as it lagged required attention. However, the beginning of was pretty bullish for the LUNA coin as the prices underwent a notable jump for the first time. The RSI which shows the strength of the rally has never visited the lower levels ever since the May crash in the long term. Even during any extreme sell-off or crash, the RSI levels flipped before hitting lower levels.

Definition of Terra (LUNA). Terra is a blockchain network that aims at creating a decentralized digital payments.

Terra price prediction: The rise and rise of LUNA explained

The deal is a token-based investment round, as opposed to equity. The company will eschew a public sale with retail investors, but it plans to hit exchanges — you guess which ones… — in the coming months. Stable coins, for the uninitiated, are tokens that are designed to remain at the same price… stable, as the name suggests. Today, stable coins are mostly used for trading and exchange-related purposes and Tether, the controversial project backed by Bitfinex, is probably the best-known. Arguably, Tether is the best example of a stable coin, and since it is propped up by the injection of hundreds of millions of dollars on a routine basis, it would be fair to say that the concept has never worked. That viewpoint might be a little cynical, and Terra believes it can make the concept work through mass adoption of its token. Its gateway for that is to leverage e-commerce in Asia. For merchants, that could mean circumventing existing payment networks like Visa, which take a cut of all revenue. The token would be spendable across all supported e-commerce services.

How to Buy Terra (LUNA)

luna terra coin explained

The current price of Terra is The Terra price can go up from See above. According to our predictions, this won't happen in near future. According to our analysis, this will not happen.

Want to jump straight to the answer? Terra is part of the decentralized finance DeFi industry, which seeks to replace traditional financial services with a decentralized alternative on the blockchain.

Terra (LUNA): A Stablecoin-Powered Payment Platform

Terra combines the price stability and wide adoption of fiat currencies with the censorship-resistance of Bitcoin and offers fast and affordable settlements. Terra, officially launched in April , 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. Terra combines the price stability and wide adoption of fiat currencies with the censorship-resistance of Bitcoin BTC and offers fast and affordable settlements. Terra was founded in January 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.

Terra Luna – 🔥 Why LUNA Coin Will Explode!!! 🔥 Luna Crypto Price Prediction

Terra is a blockchain built using the Cosmos software development kit. The network is primarily used to create algorithmic stablecoins pegged to various fiat currencies, such as the dollar or euro. At the moment, Terra is the fifth-largest layer 1 smart-contract-enabled blockchain, behind Polkadot , Cardano , Solana , and Ethereum. This upgrade, launched on November 30, activated a burn mechanism that effectively removes LUNA from circulation, making the crypto asset more scarce. By increasing the supply of UST, the price would fall. And whenever the opposite occurred, a portion of UST would be burned to mint more Luna.

Terra Luna recovered dramatically in August, rising from roughly $5 to $ Although the LUNA coin's upward speed has slowed since September.

Price volatility in cryptocurrencies is well known by anyone involved in the markets and ecosystems that have been created by the invention of the blockchain and cryptocurrencies. Because of the set issuance schedules and speculative demand nearly all cryptocurrencies see wild price fluctuations. This price volatility has been a hinderance in gaining adoption for cryptocurrencies as a medium of exchange or as transactional currencies.

As its scale grows, the team aims to have Terra evolve into a new financial infrastructure for the next generation of decentralized apps. Terra is hosting a set of stablecoins and processing transactions of partners integrating with the network. They aim to strip away inefficiencies by using blockchain technology to offer stability and adoption by e-commerce platforms. It is aimed at becoming a new worldwide financial infrastructure on which different DApps can be created.

Terra is a blockchain network built using Cosmos SDK specializing in stablecoin creation. Rather than use fiat or over-collateralized crypto as reserves, each Terra stablecoin is convertible into the network's native token, LUNA.

Shrimpy helps thousands of crypto investors manage their entire portfolio in one place. Terra LUNA is a blockchain protocol for issuing algorithmic stablecoins and creating decentralized financial infrastructure. With Terra, you can earn interest on stablecoins, spend crypto easily with merchants, and replace most of your banking needs with one seamless DeFi protocol. To accomplish its basic premise as a stablecoin platform, Terra uses an elegant seigniorage model that minimizes volatility to keep a close fiat currency peg. However, Terra does much more than issue stablecoins. It's also a smart contract-enabled blockchain hosting a burgeoning DeFi ecosystem connected to the Cosmos IBC protocol. Over time, Terra aims to pave over banks, credit networks, and payment systems like PayPal with one uninterrupted and rewarding blockchain experience.

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