An algorithm stablecoin is a cryptocurrency that tracks the price of any asset, usually currency. Algorithmic stablecoin maintain their price peg through a set of rules or software instead of an underlying asset. The terra protocol (LUNA) is the leading decentralized and open-source public blockchain protocol for algorithmic stable coins.
The Terra Protocol uses a combination of open market arbitrage incentives and decentralized oracle voting. Through this, the protocol creates stablecoins the consistently track the prince of any fiat currency. The users of the coin can spend, save, trade, or exchange Terra stablecoin instantly, all on the Terra blockchain.
The protocol itself consists of two main tokens:
- Terra: The users mint new Terra by burning Luna. Stablecoins are named for their fiat counterparts. The Terra token can be attached to the International Monetary Fund’s SDR as TerraSDR or the United States Dollar, Terra USD, or UST. All of Terra’s denominations exist in the same pool.
- Luna: The terra protocol’s native staking token is Luna. It absorbs the price volatility of Terra. It is used for governance and in mining. The users can stake Luna to record and verify transactions on the blockchain in exchange for rewards from transaction fees. The more Terra is used, the more Luna is worth.
The whole Terra protocol relies on the coins mentioned above. It is based on two pools: one which is used for Terra and the other for Luna. In order to balance the price of Terra, the Luna supply pool adds to or subtracts from Terra’s supply. The Users can burn Luna to mint Terra or burn Terra to mint Luna, which is made possible by the protocol’s market module.
The ecosystem of the protocol is slowly growing as well. Just recently, Terra announced a strategic partnership with Enjinstarter. This is Terra’s bid to enter into the metaverse fiasco as well as have an engagement with the Non-Fungible Tokens (NFTs) market.
Price Movement – Terra (LUNA)
At the time of writing, the current value of LUNA is $52.61. It has had a trading volume of $1,564,610,920. One thing to keep in mind of LUNA is that if the value of the coin suddenly rises, this indicates an increase in the regulated markets such as the New York Stock Exchange. It also shows instability in the market where a trader would feel it necessary to burn the LUNA to get Terra. The protocol has been audited Certik. There weren’t any major problems to the coin but a couple of minor problems did display themselves and seven informational aspects were given by the report as well.
