Terra System and how does it works


As explained in article (which you can find by clicking here), stablecoins are necessary for the market and act as a stable payment system. These stablecoins can be exchanged to other coins and people can convert their other tokens back into stablecoins to reserve their investments or book profits.

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Terra and its Stablecoins

One of the most used stablecoin is by the Terra network, Terra network has their stable coins that are pegged to different real life assets such as US Dollar, WON, Tugrik. Now the value of these stablecoins are controlled by their native token known as LUNA. Luna is also used to vote for governance. Some of their stablecoins are UST, TerraCNY, TerraJPY, TerraGBP.

What makes Terra Unique

Terra has a lot of stablecoins that are pinged with real life assets. But Terra is very unique to its operation. You see other stablecoins such as Tether (USDT) have their reserve mixed in physical currencies or bonds. As such each Tether that is minted is to be backed by an actual dollar or asset equivalent to it. But Terra on the other doesn’t need this backing.

Terra has algorithm based stablecoins. It controls the supply of Luna and their stablecoins to control the value of the pegged coins. The algorithm works in such a way that stablecoins are minted to match the supply and demand. It does this by controlling Luna, swapping it for the stablecoins or burning it to control the supply.

Terra is based on proof of Stake (PoS) Consensus that allows the token holders to stake their Luna. Token holders validate transactions and hence they receive rewards according to the Luna they have staked. Token holders (Luna) can also vote for governance on the Terra system.

Terra has a number of partnerships such as Chai (South Korean mobile payment system). It is backed by Terra Alliance that focuses on the adoption of the network.

Their Native Token (Luna)

As explained above Luna is their native token that keeps the price of stablecoins in check as well as perform the function of governance for the blockchain. At the time of writing Luna is being traded at the price of $38.86. Over the past 24 hours, the price has shown an increase of almost 7.62%. The daily volume has increased by almost 69%. It holds the 12th spot for the highest marketcap. Luna has a dominance of 0.62%. Luna currently has a circulating supply of about 401M coins.