Terra Protocol (LUNA) rallies 66% after DeFi and stablecoin launch
A handful of new stablecoins were launched over the course of 2020, and many analysts have indicated that the growth of stablecoins is the backbone of the crypto sector and is partly responsible for the current Bitcoin rally.
For many traders, stablecoins offer a safe place to protect themselves in bitcoin and altcoins during volatile times. However, there are other ways to interact with these fiat-linked assets as well.
The Terra protocol aims to create a programmable algorithmic stable coin that is available on any blockchain. Similar to its well-known competitor Maker (MKR), Terra Protocol has a native stabilizing crypto asset called LUNA.
The project was launched by a partnership of 15 major e-commerce companies based in Asia that serve more than 30 million users. The ecosystem is focused on building efficient, scalable, and competitive programmable payments.
Prior to the March 2019 ICO, the company raised $ 32 million in a seed funding round that included Hashed, Polychain Capital, Huobi and XRP Arrington Capital.
Terra’s key element is the Chai payment app, which now has over a million downloads on the Android store. Users can collect points with Chais partners that can be redeemed for merchant rewards.
These partners include TMon, Qoo10, Yanolja, Megabox and Musinsa, who offer benefits in exchange for marketing sponsorship for Chai’s member base.
The company also offers a debit card called the Chai Card, which was launched in June 2019. On December 9th, Chai received a Series B investment of $ 60 million from SoftBank and Hanwha Investment & Securities.
Stable coin and earnings mechanism
Terra (LUNA), Synthetic (SNX) and Ren (REN) in USDT. Source: TradingView
The protocol runs on a proof-of-stake blockchain in which miners have to use the native cryptocurrency (LUNA) to mine Terra transactions.
Recently, the market cap for the stable TerraUSD (UST) coin was over $ 150 million. This is a significant milestone given the token launched just three months ago.
According to Terra’s whitepaper LUNA
“Achieves price stability through an elastic money supply that is made possible by stable incentives for mining. It also uses the seigniorage created by its coin-operated transactions as a transaction incentive and thus facilitates acceptance.”
Unlike most decentralized financial applications, LUNA uses its own miners as oracles. The weighted median of the votes will meet the target fiat pricing, and miners will be rewarded for being correct.
Currently, most of the ROI comes from purchases made by ecommerce customers through the CHAI app. This means that LUNA token holders have great incentives to stake out.
On July 6th, Terra Blockchain presented the Anchor savings protocol. Unlike most DeFi apps, it offers a principled stable coin that pays an interest rate.
Anchor accepts stable TerraUSD (UST) coin deposits and can eventually use the funds to acquire equity positions in various blockchains. This enables interoperability with blockchains for proof of use and also generates passive income for depositors.
It’s worth noting that Anchor doesn’t include any ways to stake out the Ethereum ecosystem as they don’t provide evidence of deployment.
Synthetic assets and referral marketing
Despite delivering key milestones, including the USD Stablecoin and DeFi applications, LUNA has mimicked the performance of its colleagues Synthetix (SNX) and Ren (REN).
More recently, on December 4th, LUNA launched a DeFi initiative called Mirror Protocol that enables synthetic assets by providing price risk in the chain. This includes stocks, commodities and ETFs, and the platform uses BAND (Band Protocol) oracle solutions for pricing.
Several problems arose during this process. Price mechanisms were absent on weekends when traditional markets are closed. Another problem was the 150% collateral requirement in LUNA Stablecoin.
The most recent product release was on December 10th, when Terra Protocol launched BuzLink, a marketing platform that rewards the entire referral chain when a sale is made.
The marketing tool distributes stablecoin rewards to product recipients via the Terra blockchain. Therefore, when a user purchases the product, all users who share the product link will benefit.
LUNA Twitter Users Activity vs. USD price. Source: TheTie
Data from TheTie also shows that price spikes were associated with an increase and decrease in social networking activity. This suggests that traders can benefit from close monitoring of the Terra Protocol’s partnerships and announcements to identify less active periods, as these are usually associated with price stagnation.
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