When stablecoins were first introduced to the cryptocurrency market, they became one of the primary solutions against the extreme volatility of digital assets. Since they are backed by a reserve asset and pegged to a currency like the U.S. dollar, they offer price stability. Now, the possibility of using cryptocurrencies as a medium of monetary exchange becomes accessible. Some of these digital assets include Tether (USDT), Binance USD (BUSD) and USD Coin (USDC).
Taking advantage of the situation, Terra (LUNA) was launched to further improve the crypto sphere. The team behind the protocol has long recognized that price stability is not enough to encourage the mainstream adoption of crypto. With advanced economic policies, it establishes price-stable cryptocurrencies pegged to different fiat currencies.
If you want to learn more about Terra cryptocurrency, continue reading the article below.
What is the Terra Protocol?
Considered to be a blockchain protocol, Terra (LUNA) establishes an economic, decentralised infrastructure that aims to bring a unique price-stability algorithm through stablecoins. The network uses smart contracts along with oracle systems to integrate blockchain-based applications for its users.
By using its algorithm and changing monetary supply, it maintains the value of digital assets within the network for lower transaction costs. It also consistently tracks the value of a fiat currency—like the US dollar or Japanese Yen (JPY)—so investors can trade stablecoins instantly on the Terra blockchain.
Its native token LUNA helps in stabilizing the protocol’s entire program as well, mainly serving as the backing asset. How does it work? For instance, the value of 1 TerraUSD (UST) comes from its supply and demand. If more users would pay in UST, they will help boost the stablecoin’s price. This means that LUNA holders would have to dilute the UST supply by minting new UST tokens. In short, the more Terra stablecoins are used, the higher Luna is worth.
Terra can be recognised as a digital bank through its offered fiat pegged stablecoins. What makes this revolutionary is it becomes an ideal alternative to the complicated processes offered by payment gateways, credit cards and banking institutions. This means that Terra is paving the way for efficient transactions while offering a transparent payment system.
A brief history of Terra: How everything started
Back in 2018, the project Terra was initially launched by Do Kwon and Daniel Shin. According to the founders, this move was prompted by the idea that flexibility is possible within the digital economy. The blockchain they wanted to create also aims to significantly reduce the issues that the most popular stablecoins in the market face. Its goal is to overcome these concerns using a decentralized financial infrastructure, relying on its algorithm for the stability of its asset prices.
So, how do you put it into reference? What Terra did is that it issued TerraUSD (UST) pegged to USD and MNT for Mongolian tugrik, among others. The coins would be much easier to use by any individual or institution worldwide, allowing for transactions with a 0.5–2% fee in a couple of seconds.
For instance, if you are a businessman in South Korea and have to transfer funds to your business partner residing in the United States, then you can just exchange KRT for UST on the Terra blockchain. Gone are the days when third parties take part in processing your payments or converting your fiat that can last for a few days in most cases.
Top benefits of Terra you should know
Due to its decentralised and permissionless nature, the launch of Terra has brought stablecoin development to a whole new level. It has strengthened the infrastructure of the DeFi ecosystem using its logistics and competitive programmable payments, to name a few.
So, should you invest in Terra cryptocurrency? Find the answer when you check the benefits you can expect:
Simplified financial transactions
When project Terra was still in its infancy stages, establishing a transparent DeFi ecosystem was one of the priorities of the development team. They wanted to build something that would serve as a replacement for complex payment systems that further inconvenience people.
Now that Terra uses a single blockchain layer, the protocol lessens transaction time because it eliminates the need for credit card networks and financial institutions.
It is programmable
If you’re looking for a cryptocurrency that is programmable and development-centred, then the Terra protocol should be one of your choices. Programmers operating in the network are permitted to build smart contracts in AssemblyScript, Go or Rust, which add functionality to decentralised applications (dApps).
It facilitates interoperability
Keep in mind that the Terra network operates on a multi-chain protocol. Through the Cosmos IBC, it has the power to effortlessly communicate with other blockchains in the crypto sphere. This means that it can facilitate interoperability, which allows them to access information on various blockchain networks.
Terra is currently running on Solana and Ethereum. Its developers are planning to expand their platform which would welcome competitive blockchains.
Terra: The central bank of cryptocurrencies
Offering price stability through smart contracts and algorithms, Terra is considered to be one of the best innovations in the crypto market. What’s unique about the protocol is its self-adjusting monetary supply framework, capturing the essence of true decentralisation.
Currently, Terra is enjoying its popularity in Asian countries due to its less volatility compared to popular digital currencies like Bitcoin and Ethereum. The development team is continuously laying out its forthcoming projects that revolve around innovative DeFi solutions.
This includes TerraSwap, the first-ever decentralised exchange on the Terra blockchain. Its mechanism is similar to Uniswap but it was originally built to allow users in trading native Terra and CW20 tokens.
Not only that, the team behind Terra has forthcoming projects that would revolutionize the DeFi space. Spar Finance, Mars Protocol and Loop Finance are on the list of upcoming protocols, so stay tuned here at BTC Post for more updates!
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