What is TERRA?

What is TERRA?
Table of Contents

Do you know about Financial Ecosystem?

Like any other ecosystem, the financial ecosystem is a collection of different people, organizations, processes, and systems that let us all buy and sell things, use money, save it, invest, and anything else related to finance. Crypto Financial Ecosystem is a new arena. The crypto world may have some creative and isolated individual projects but what it needs is an ecosystem.

What is the Terra Blockchain?

In crypto terms, TERRA is a proof of stake blockchain intended to maximize and widen the potential benefits of crypto for the financial world, emphasizing a mass payment processing system and a creation of an excellent stable coin.

Terra’s Payment Processing

Visa MasterCard or American Express aren’t working for anything. They take around two to three percent of every transaction they help within fees that the merchants pay to the credit card company. For us, this doesn’t sound good a lot, but if everyone goes into a store and buys one bag of hot Cheetos for two bucks, those fees start to add up, speaking of fees. Terra caps fees at one percent, but that’s just the cap. Fees are usually much lower than one percent, and you can see the benefits of merchants switching to the terra blockchain.

The Stable coin part of Terra

Other blockchains and other cryptosystems have done this before, but here’s what they haven’t done. Besides payment processing, Terra has many other cool features that set it apart from other cryptocurrencies and other financial processes and products. Terra uses a blockchain, and bitcoin uses a blockchain too. The difference is why a merchant would want to use Terra when they could use bitcoin. The thing is, bitcoin is volatile. The value of bitcoin measured in dollars varies all day long. This is essential because we usually measure things in dollars, whether that’s a bag of candy, a car payment, your rent; everyone thinks in dollar bills. The volatility problem inspired and created something called Stable Coins. Stable coins are simply cryptocurrencies that are pegged to fiat currencies. So if people have measured their money in these fiat currencies and use this fiat currency continuously, they don’t want to use something like bitcoin, which could change value because nobody wants to be the one who spent 10,000 bitcoins on some lunch. At the moment, it may have been only 15 dollars’ worth, but if they spend it, people fear that there may be a probability it could rise, and if they accept it as a purchase, they fear that maybe the price could go down. The core idea here is to create a separate channel for one to make payments and another to invest in. We don’t like them to be the same thing. We want our money to have a safe and stable value to expect it to be worth the same thing tomorrow and the day after, and hopefully the following year.

Terra’s Stable Coin Algorithm

Terra solves the above problem by using a stable coin algorithm that allows specific tokens on the network to stay at a constant price. So Terra has a stable coin for several different currencies like the US dollar, UST, Korean Wan represented as KRT and Euro, and EUT. These are easy ways of using cryptocurrency to transact more straightforwardly, faster, and cheaper than before. So Terra is attempting to bring the advantages of crypto, DeFi, and all of those decentralized applications without the volatility and unpredictability of the prices.

Have you ever heard about Titan Crash?

Algorithmic stable coins have never worked well so far; Terra has worked. Let’s talk about the recent titan and iron finance algorithmic stable coin crash because it seems similar. When we dig into why it crashed, it was majorly because there was no reason to hold titan or iron other than to use them to make more money, and this was usefully a Ponzi scheme in the crypto world. Terra is distinct because they created a stable coin with a purpose. Terra is built around a complete blockchain ecosystem for all the dApps and platforms to use while titan get-rich-quick yield farming opportunity that was pumped and dumped on and even more so it was on someone’s else blockchain. Even Ethereum itself gets its value from the ecosystem surrounding Ethereum. All dApps and smart contracts and protocols are precisely what Terra stable coins are banking on. The research has shown that this process has worked pretty far and appears quite different from the titan and iron finance death spiral.

What is LUNA?

The Terra ecosystem holds two assets. The native network coin is called LUNA, and the stable coin is called UST. Now the power of LUNA is a bit different from other projects because it is used to maintain Terra’s safe, stable value, but the concept is the same. LUNA is a token used to keep the price of Terra at precisely one dollar. It is also used for network fees. Discussing its working, when the value of UST is mismatched to the value of a real US dollar, they use LUNA for incentivizing people to do various things to stabilize the price. They do this either by burning their UST, creating more of it to manipulate the value and the users that proactively help the network stay stable and incentivized with profits.

Where does all the everlasting profit come from?

The profit seems to be from money flowing into the blockchain ecosystem. As more people buy UST, LUNA will grow in price. Although a small portion of this profit goes to those, who help keep UST stable. But if people start taking their money out of the ecosystem, LUNA will fall in price.

What can you do with Terra?

The goal of Terra is to simplify transactions by using stable coins. The anchor also aims to create savings accounts. This gets people to stay their UST on the blockchain ecosystem.