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Battered cryptocurrency: Does Terra (LUNA) still have a future on the market?

 


What is Terra (LUNA)?

Terra (LUNA) is a blockchain protocol that is characterized by keeping stablecoins stable through algorithms. It uses the proof-of-stake consensus mechanism . The network aims to develop price-stable stablecoins that are completely decentralized and price-based on FIAT currencies such as the US dollar. 

Terra was only developed in 2018 by Do Kwon and Daniel Shin. The Terra protocol forms the basis for the network's stablecoin, which tracks the courses of FIAT currencies. Terra's native cryptocurrency is the LUNA, which is based on an open-source protocol and maintains the price stability of the Terra stablecoins. 


What is a stable coin?

Stablecoins are price-stable cryptocurrencies that are based on the rates of FIAT currencies such as the US dollar. They are in contrast to the volatile "normal" cryptocurrencies, which constantly fluctuate in price. The stablecoins are particularly important as liquidity and trading currency on crypto exchanges.



The most important stablecoins are Tether, USD Coin and BinanceUSD. These stablecoins are not completely decentralized, they are centralized stablecoins because there is a central institution behind the stablecoin. This is necessary because these stablecoins need to be backed by a lot of US dollars or other FIAT currencies. 


TerraUSD (UST) should be an algorithmic stablecoin. These do not need any reserves as cover and should be kept stable solely by algorithms. This means that these stablecoins are completely decentralized. 


What is special about Terra (LUNA)?

Terra (LUNA) is a network that has set itself the task of creating completely decentralized stablecoins. With the LUNA token, the stablecoins can be kept stable without reserves. This was an important step forward as the previously dominant stablecoins in the market are all centralized. 


The protocol also allows users to create their own stablecoins. The network was considered to be extremely user-friendly and clear. The most important stablecoin was the TerraUSD, which partly rose to the top 15 cryptocurrencies by market capitalization. 


Why did Terra become so popular in 2022?

Due to the possibility of establishing decentralized stablecoins within the network, Terra (LUNA) became extremely popular in the first half of the year. The LUNA token rose to the top 10 cryptocurrencies by market capitalization. Furthermore, the stablecoin TerraUSD (UST) became extremely successful.


Terra USD

Especially in the area of ​​decentralized financial services (DeFi), Terra (LUNA) became extremely successful and was the number 2 blockchain behind Ethereum . In the Total Locked Value (TLV) in the DeFi area, Terra was already at 20% of all DeFi applications. 


What happened to Terra (LUNA)?

In May 2022, the network suddenly and unexpectedly imploded. The reason was that LUNA could no longer keep the price of the popular TerraUSD stablecoin stable. When the UST suddenly became unstable in price, confidence in the LUNA token plummeted, causing the LUNA to crash. 

From a price of $86 in early May, the price fell to $0.0001 within a few hours. This was the result of the chain reaction following UST's lack of stability. Trust in the Terra ecosystem was completely broken. As a result, the Terra ecosystem had to be completely reorganized.


What did Terra (LUNA) do after the debacle?

After the massive crash of the LUNA token and the implosion of the network, Terra needed a complete fresh start. The network has lost confidence and with it almost all of its investors. There was a new launch. The new network is called Terra 2.0. The old network remained and has been called Terra Classic ever since.

Originally, there should be a hard fork from the old Terra Blockchain. However, this plan was rejected and a completely new blockchain called Terra 2.0 was created. Terra Classic will remain as the old blockchain. 


How is the new Terra developing?

When the Terra 2.0 network was introduced, the price of the LUNA token fell massively. The price has remained relatively stable in recent months. The course moved between 1.50 and 2 dollars. The price movements of Bitcoin and the overall market had less influence on the price. 

So while it doesn't look like the new Terra will regain momentum, we do see interesting developments with Terra Classic. The price has increased by about 60% in the last few days. This is due to the launch of LUNC DAO's new staking service. In this article , we discuss the latest developments in more detail. 


What does the development at Terra (LUNA) show?

The story of Terra (LUNA) shows how risky an investment in an avoidably rising project can be. With the implosion of Terra, many investors lost an extremely large amount of money. The new Terra 2.0 has not yet been able to pick up speed and the LUNA owners are still not seeing any new returns.


That's why it's difficult to invest in a hyped project and hope for higher returns. The risk is much lower if you invest in a small project before it gets hyped. Furthermore, you should always keep in mind that you can always lose your stake when investing in a cryptocurrency. Cryptocurrencies remain risky investments.


Should you invest in Terra or Terra Classic?

At the moment we see little movement at Terra. Nevertheless, the project still has potential, as the massive hype in early 2022 shows. Terra Classic also shows an interesting development. If you want to make a risk investment with the possibility of high returns, Terra (LUNA) is still a good choice.


It is likely that Terra will not be able to recover in the future and will hardly increase in price. However, there is a possibility that the price may shoot up again in the future. Therefore, you could make a risk investment now.

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