LUNA Coin is currently in the spotlight because its price plunged very deep on Thursday, May 12, 2022. LUNA’s price was traded below USD 1.00 or even USD 0.3118 its lowest price since September 2021.
So what exactly is LUNA Coin? Before entering into the discussion of LUNA Coin, it is necessary to know in advance about the network where LUNA is located, namely Terra.
What is Terra?
Terra is a blockchain created with the aim of creating a decentralized digital payments ecosystem using Stablecoins. A stablecoin is a crypto asset that was created to have a value equivalent to fiat currency. The popular stablecoin asset that Terra created is Terra USD (UST).
Reporting from Coinmarketcap Thursday (12/5/2022), Terra’s development began in January 2018, and its mainnet officially launched in April 2019. Starting September 2021, it offers stablecoins pegged to the US dollar, South Korean won, Mongolian tugrik, and the currency of the International Monetary Fund Special Drawing Rights.
What is LUNA
LUNA is the native cryptocurrency of the Terra network used to stabilize the price of the protocol’s stablecoins. LUNA holders can also submit and vote on governance proposals, granting them governance token functionality.
Founder of Terra
Terra was founded in January 2018 by Daniel Shin and Do Kwon. Both understand the project as a way to encourage rapid adoption of blockchain technology and cryptocurrencies through a focus on price stability and usability. Kwon takes on the position of CEO of Terraform Labs, the company behind Terra.
Prior to developing Terra , Shin co-founded and led Ticket Monster, otherwise known as TMON, South Korea’s premier e-commerce platform. He later founded Fast Track Asia, a startup incubator that works with entrepreneurs to build fully functional companies.
Kwon previously founded and served as CEO of Anyfi, a startup that provides decentralized wireless mesh network solutions. He has also worked as a software engineer for Microsoft and Apple.
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Terra seeks to differentiate itself through the use of fiat-pegged stablecoins, stating it combines the unlimited benefits of cryptocurrencies with the day-to-day stability of fiat currency prices.
It creates a one-to-one stake through an algorithm that automatically adjusts the supply of stablecoins based on their demand. It does so by incentivizing LUNA holders to trade LUNA and stablecoins at favorable exchange rates, as needed, to expand or contract the supply of stablecoins to match demand.
Terra’s Role for UST
Apart from owning LUNA, Terra also owns a Stablecoin called Terra USD (UST). The LUNA and UST tokens are interdependent, as the success of the Terra ecosystem is a function of the adoption of UST as a stablecoin.
LUNA supports UST and catches fire when demand for UST increases. After the Columbus-5 upgrade, the supply of LUNA could become very deflationary in the long run. On the other hand, the LUNA value may also fall if UST is considered unstable.