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The Terra Ecosystem
$LUNA.X the flagship token of the Terra ecosystem has gone from a mere $0.65 at the start of this year to over $13 (down from highs of $22) at the time of writing. So what's the driver of this explosive growth (even by crypto standards)?

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At the heart of the Terra ecosystem is their stablecoin offering. They believe that a price-stable currency is required to enable mass-scale adoption of crypto as a medium of exchange and a store of value. Their stablecoin offering actually includes a basket of tokens, each pegged to one of the world's prominent fiat currencies (UST to USD, AUT to AUD, INT to INR etc.). The price of the stablecoin is pegged to its fiat counterpart using the $LUNA.X token. For example, if the price of:
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  • UST is < $1; then users can send 1 UST to the system to receive $1 worth of newly minted $LUNA.X. Thus, creating an arbitrage opportunity.
  • UST is > $1; then users can send $1 worth of $LUNA.X to the system to receive 1 UST in return. Also, creating arbitrage on the other side.

Since Terra is a proof-of-stake blockchain, miners stake their $LUNA.X to receive block rewards.

In the first case, when new $LUNA.X is minted, the miners lose out on rewards since they own a smaller percentage of the total $LUNA.X supply (this is the essence of a proof-of-stake blockchain). But the Terra ecosystem tries to incentivise miners with consistent rewards (which come from transactions on the Terra blockchain) so that they are willing to take small hits during periods of price volatility. To counter-act dilution, the $LUNA.X the system receives in the second case (when UST > $1) is partially burned. The rest of the $LUNA.X is moved to the treasury and provided as funding to dApps that contribute to the trading volume of the Terra ecosystem.

The overall bull case for $LUNA.X is the growth of the Terra economy (i.e. increase in transaction volume), leading to more rewards for miners staking $LUNA.X (making holding the token lucrative). So it naturally makes sense to look at some applications on Terra to see where their economy is headed:

Chai

One of the first dApps on terra, Chai, enables mobile payments on the Terra blockchain. According to this post by the folks at Terra, it gained over 500,000 users in just 4 months of operation, processing $54,000,000 in transactions. Chai has successfully integrated with some of the biggest e-commerce platforms in Korea and offers payments for a much lower cost than traditional methods like credit cards. They currently have over 2,000,000 users and are doing a very healthy $2,000,000 in transaction volume daily (source: here).

Chai shows that the terra blockchain has at least one viable use case in payments and has been a huge part of the early growth of the terra economy. If Chai can capture the lion's share of payments only in Korea, I'd say that's a multi-billion dollar company. What does that mean for the Terra economy and $LUNA.X?

Mirror

Mirror, another terra dApp, aims to mirror assets such as stocks onto the blockchain. Someone could choose to buy stocks in companies like Tesla, Apple, and Google without moving funds out of the terra ecosystem. This is primarily aimed at allowing anyone with an internet connection to access the asymmetric opportunities in the public markets that all of us on commonstock are reaping amazing rewards from. Anyone can mint an mAsset (e.g. mint mTSLA to track $TSLA) by locking up collateral and then trading the asset to other users on the mirror protocol (the user minting the asset is essentially shorting the asset, but I'll leave the specifics of mirror for another memo). Mirror already has over $2,000,000,000 in total value locked with mAAPL being the largest asset (besides $MIR.X, the governance token for the protocol) having over $61,000,000 in total liquidity. Overall, I'm extremely bullish on the idea of being able to deal in tokenized stocks to cut out a lot of the issues around buying US stocks across the world.

Side note: $MIR.X recently listed on Coinbase but Coinbase doesn't yet support $LUNA.X.

Anchor

Anchor Protocol is a savings platform that is currently providing 20% APY guaranteed. This is only the second savings platform on DeFi that I've seen provide stable yields (the first being 88mph.app). It uses block rewards from proof-of-stake blockchains to guarantee these yields (I'll use another memo to talk about how Anchor works in detail). But according to the the most important thing about Anchor is that a simple, intuitive, savings platform that provides significantly higher yields than TradFi could be big for the large-scale adoption of crypto.

Side note: Right now, even borrowing UST from anchor provides positive yields (yes, you read that right!) due to them distributing $ANC tokens as rewards.

All in all, I think the terra ecosystem is building all the right primitives to become a serious player in DeFi (maybe the first whose utility can become comparable to Ethereum) and I remain bullish on the ecosystem over the next 5-10 years irrespective of crypto's bull-bear cycles.


Upcoming
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  • It looks like the city of Busan in South Korea is signing a deal with Terra to use their blockchain. Tweet here.
  • A derivatives platform is also coming live on terra in the near future: https://vega.xyz/
  • Saturn money is bringing a fiat on-ramp to Terra which might open the floodgates for large-scale adoption given how easy all of Terra's products are to use.

Buying

$LUNA.X is, unfortunately (or maybe fortunately if you like getting in before the Coinbase pump) not on Coinbase yet. But is available to buy on Binance, OKEx and Huobi afaik. (Note: $MIR.X is available on Coinbase).

I tend to just buy UST, move it to terra station and then use the swap feature there to buy tokens in the Terra ecosystem.

Staking

$LUNA.X can be directly staked on https://station.terra.money/. The rewards are currently in the 40% range, coming in the form of $LUNA.X and stablecoins earned directly earned on Terra station + airdrops of $MIR.X and $ANC that can be collected from https://terra.mirror.finance/airdrop and https://app.anchorprotocol.com/airdrop. Staking $LUNA.X also comes with a number of airdrops for projects that launch on terra but timing these isn't straightforward.

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