The biggest staking pool holding Luna is Orion Money, which holds more than 15% of the total Luna tokens supply. As such, the visionaries behind Terra have identified that today’s internet lacks native money, particularly price-stable ones. This is why Terra strives to become a hub for programmable internet money. By doing this, the project aims to replace the currently complicated payment value chain, including credit card networks, banks, and other payment gateways. In Terra’s vision, this results in significantly lower transaction fees for merchants, which ultimately benefits e-commerce users. With its end-to-end payment solution, Terra’s transaction costs amount to only 0.5-2% compared to the industry norm of 2.5-3%.
Understanding Terra
- Each time someone buys something—like an ice cream—using UST, that transaction generates a fee, similar to a credit card transaction.
- Do Kwon was formerly employed by Microsoft and Apple and founded a startup, Anyfi, which offered decentralized wireless mesh networking solutions.
- Although Terra is becoming more popular in Korea thanks to rising interest in its partner Chai, it’s too early to say whether Terra-related currencies will gain traction in other countries.
- It will be interesting to see whether they will be able to keep on delivering.
- Used for governance and mining, Luna is the Terra protocol’s staking token, which absorbs the price volatility of Terra stablecoins.
At the end of September 2021, Terra launched an upgrade called Columbus-5. This added functionality for the Inter Blockchain Communication (IBC) protocol, which allowed Terra to become interoperable with other blockchains. Standouts include an insurance protocol called Ozone, and support for UST from cross-blockchain bridge Wormhole V2. TerraUS (UST) is algorithmically pegged to the U.S. dollar, so it is considered a stablecoin because it’s designed to maintain value. On May 9, TerraUSD (UST) lost its peg to the dollar and, by May 11, had dipped as low as $0.30. The founders attempted to stabilize its price with cash infusions and by adjusting protocols to reduce supply.
Phases of Luna
Users can redelegate to another validator instantly without waiting for the unbonding period to end. Delegators can unbond or unstake their Luna using the undelegate function in Station. During this period, the unbonding Luna can’t be traded, and no staking rewards accrue. UST plummeted as low as $0.30 on May 11, essentially wiping more than $11 billion from UST’s market capitalization. In May 2022, these questions were thrown into sharp relief as Terra’s native stablecoin UST lost its dollar peg amid a wider crypto market crash.
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For this reason, it is very important that each delegator votes according to their preferences. When a user redelegates staked Luna from one validator to another, the validator receiving the staked Luna is barred from making further redelegation transactions for 21 days. This restriction only applies to the wallet that made the redelegation transaction. Redelegating instantly sends staked Luna from one validator to another. Instead of waiting for the 21-day unstaking period, a user can redelegate their staked Luna at any time using Station’s redelegate function.
The new Terra blockchain continues the legacy of Terra Classic without the UST stablecoin. It will keep building with the help of the LUNA community dubbed “LUNAtics” and evolve the world-class UX and UI that brought Terra Classic up to second place in total value locked (TVL) at its peak. Many DApps have agreed to migrate to Terra to continue their functionality. When a validator gets slashed, delegators who stake to that validator also get slashed. Though slashing is rare and usually results in a small penalty, it does occur.
When a validator gets slashed, they lose a small portion of their stake as well as a small portion of their delegator’s stake. Slashed validators https://cryptolisting.org/ also get jailed, or excluded, from consensus for a period of time. This process repeats, adding new blocks of transactions to the chain.
These are stablecoins that track the price of fiat currencies and are named after them. For instance, the base Terra stablecoin tracks the price of the International Monetary Fund’s Special Drawing Rights and is named TerraSDR or SDT. Other Terra stablecoin denominations include TerraUSD (UST), which tracks the U.S. dollar, and TerraKRW (KRT) which tracks the South Korean won. Terra is a payment system that resides and is built upon a blockchain. It was developed by South Korea-based Terraform Labs, which was founded in 2018 by Do Kwon and Daniel Shin.
Each validator has a copy of all transactions made on the network, which they compare against the proposed block of transactions before voting. Because multiple independent validators take place in consensus voting, it is infeasible for any false block to be accepted. In this way, validators protect the integrity of the Terra blockchain and ensure the validity of each transaction. Stablecoins are assets pegged to the price of a single asset, typically a fiat currency such as the dollar.
Decentralized stablecoins try to avoid these governance issues by maintaining their pegs through algorithms instead of through vast reserves of cash and debt. As more Terra applications or use cases for UST arise, the demand for LUNA will increase, leading to the rise in value of LUNA. If a user fails to specify a vote, their vote defaults to the validator they are staked to. Validators vote with their entire stake unless specified by delegators.
Generic proposals, such as a passed TextProposal, must be reviewed by the Terra team and community, and they must be manually implemented. Generally, the terms bonding, staking, and delegating can be used interchangeably, as they happen in the same step. A delegator delegates Luna to a validator, the Luna gets bonded to the validator, and the bonded Luna gets added to the validator’s stake.
Furthermore, vested LUNA distributed during the airdrop will be automatically staked to Terra validators. Users can change their delegator and will earn staking rewards on their vested LUNA but are subject to a six-month cliff. You can read the full details of the Terra (LUNA) airdrop in this explainer article by Terra.
On May 25th, 2022, Terra Classic users passed governance proposal 1623, which outlined the genesis of a new Terra chain. This proposal also described a genesis distribution of Luna which would be airdropped to users of the Terra Classic chain based on pre-depeg and post-depeg snapshots. Users can find their airdropped Luna by viewing the same wallet address that was present during either snapshot and switching their Station network to the phoenix-1 mainnet. Terra’s blockchain runs on a “limited number of nodes,” said Messari’s Watkins, referring to the computers that help keep the system running. That helps reduce latency that may otherwise slow processing of financial transactions, he said. Since Cosmos, and by extension Terra, is a smart contract blockchain protocol, you can use Terra coins within any of the applications built on the protocol.
UST’s de-pegging also attracted renewed attention from regulators. Treasury Secretary Janet Yellen cited UST’s collapse as yet another reason that stablecoins need to be regulated in 2022. In addition to using the assets for some service or utility, there’s a potential arbitrage opportunity. Arbitrageurs—traders who profit from small price discrepancies—help to keep the price of UST in check by selling LUNA for UST when the price of UST is below $1 and buying LUNA when UST is worth more than $1.
It’s now-renamed LUNC token collateralized UST, which crashed in a bank run in May 2022. That devalued LUNA to virtually zero and caused a launch of a new chain — resulting in Terra Classic and do credit notes have an expiry date Terra. Delegators are users who want to receive rewards from consensus without running a full node. Delegators stake their Luna to a validator, adding to a validator’s weight, or total stake.
