New and powerful blockchain protocols like the Terra blockchain, TerraUSD, and Luna coin are bringing about changes in the world of finance. The stock market and other financial instruments are being put into the hands of the general public. This is now possible with the Terra blockchain, TerraUSD, and the Luna coin.
Two men from South Korea have come up with an idea that should catch on like wildfire. They have put encryption and trustless software to work to create a system that allows anyone to synthetically begin trading stocks, even in countries that they are not members of. How does this system work? The basic gist of the Terra blockchain is that users can assign values to anything they want. From diamonds and gold to corn and wheat, the universal use of this strategy is amazing. One of the latest examples is of a large cryptocurrency exchange. They are accepting trading on their platform using the same Terra blockchain. A major stock being tokenized is the Tesla Motors Company. But the Terra blockchain and its coins and tokens are intended to function without the need for exchanges.
- 1 Terra blockchain is decentralized and interoperable
- 2 TerraUSD and Luna coin are proof of stake coins
- 3 The value of TerraUSD
- 4 The relation between the parts of the Terra blockchain
- 5 Applying TerraUSD to other blockchains
- 6 Digital savings accounts with the Terra blockchain
- 7 No centralization problems like other stablecoins
- 8 Applying TerraUSD to industry
- 9 Unprecedented features and usability
Terra blockchain is decentralized and interoperable
An Asian firm called Terraform Labs is the creator of this blockchain. Having its beginnings in Asia, the Terra blockchain is supportive of other Asian, American, and European Terra coins. TerraUSD can be interchanged automatically with other crypto coins that represent major fiat currencies. The Korean Won (TerraKRW) is the cousin of TerraUSD and can be swapped directly between the two and all other Terra coins. Terraform Labs is well-versed in the world of finance and eCommerce. Having this advantage, they continued with their creation of coins having no central point of failure. Similar to bitcoin, litecoin, vertcoin and others, a complete network can be repopulated for all users with just one node on the system.
TerraUSD and Luna coin are proof of stake coins
The remarkable system that supports this crypto coin undertaking is new. While bitcoin and litecoin are “proof of work” and have been since their inception, the TerraUSD and Luna coin is not like this. Those who buy into the Terra network are said to be staking a claim into the value of TerraUSD and Luna. This is similar to the old saying; “Put your money where your mouth is.”. This method is called “proof of stake”. It is getting to be the norm for modern crypto users to begin their financial journey. Many coins provide a reward for staking. The Luna coin is no different.
The value of TerraUSD
The value of one TerraUSD is currently one United States dollar. It is designed this way to provide a pegged reference to the recognizable value of the US dollar. There are advantages to this, one being that a TerraUSD can give ease of use for those who have no idea what cryptocurrencies are worth. Because of the idea of price stability TerraUSD is considered to be a “stablecoin”. Bitcoin has never obtained such a title. The companion coin called Luna helps this Terra coin and all others to maintain their usefulness in the area of stability over time. TerraUSD was more designed to be used than to be hoarded. This usefulness was on the mind of its creators in its first days. A digital currency that holds its own value against local fiat currencies is now available.
The relation between the parts of the Terra blockchain
All currencies need stability for the public to trust in them. The overall history of bitcoin is that the value can be trusted, but at times there are problems with a swing in the price. TerraUSD and Luna work together to alleviate the problem of a lack of price stability. Some call this interoperability. Some call this liquidity. The idea is that those who own Luna are going to have a say in the mining and voting power in the Terra network. The other complexities of the TerraUSD coin are connected with other coins in the same family. The robust nature of this blockchain concerning its family of coins is bound to be a game-changer for those who look for financial freedom in decentralized finance.
Applying TerraUSD to other blockchains
Simply put, all cryptocurrencies operate with one basic tenet; they are protected by cryptography. This is a math formula that creates a system that is electronically unbreakable even with today’s powerful computers. But the problem of trading a bitcoin for a litecoin across this cryptographic chasm has been strong. Something called “atomic swaps” has attempted to alleviate the problem of trading one crypto coin for another. This system failed to catch on. The liquidity that is built into the Terra blockchain and its coins is a solution to the failed atomic swap method.
This crypto method is an improvement over the Ethereum model
The DAI is the most popular stablecoin built on Ethereum, which in itself is hugely popular. Like the Tether coin and TerraUSD, it is pegged to the US dollar. But thanks to the problems in this new world of crypto, market economics prevents the user satisfaction that should have been happening with the DAI coin. The supply and demand that govern all markets are skewed with DAI so that demand for DAI is not commensurate with the leverage that users are looking for when they use it. That is, the high demand for DAI on the Ethereum network works out to make it valued higher than the US dollar it is supposed to be pegged to. In fewer words, DAI is simply not working as it was originally intended. TerraUSD aims to take care of this problem with the relationship between itself and the Luna coin. The basics of marketing are taken care of because the cost of minting one TerraUSD is matched by the “burning” of the Luna reserve asset. Like the Moon gives stability to the Earth, the Luna coin gives stability to the TerraUSD coin.
Digital savings accounts with the Terra blockchain
This is a newfound ability similar to how banks in the past provided an interest rate for those who stored money with them. As you may have guessed, the Terra blockchain also has an option called “Anchor” which provides a yield just like the banks of yesteryear. This is unique among the coins in the crypto realm. Terra stablecoins can be deposited into the new “Anchor Protocol”. All it takes is to own some TerraUSD and have its corresponding wallet. The yield rate as of this writing is 18.01 percent. This will beat almost any bank in existence today. Please remember that all the Terra coins can be swapped into TerraUSD so this digital savings account is now available to those in many countries.
The algorithmic stablecoin for at least the next ten years
Terra USD is just one in a family of algorithmic stablecoins. All the others are also designed to be pegged to various currencies. Korea has accepted the idea of Terra very well. The original idea was to create a cryptocurrency that would be used by tens of millions of people. Transactional volumes would be into the billions. Starting with a massive userbase, the adoption rate was to skyrocket quickly. With a fast pace of regulatory acceptance coupled with new ideas in technology, the ultimate success of the Terra blockchain and its coins was to be assured. The average person would be able to use and accept these stablecoins. The dapp (digital app) idea did not take off, but these Terra stablecoins have. Asian users have accepted them and transactional volume is proving this system to be a winner. There are already a number of various payment options supported in the short three years of existence.
No centralization problems like other stablecoins
The stability of other stablecoins like Tether seems inferior when compared with TerraUSD. When a coin like Tether is supposedly backed one to one by dollars in a bank account, this seems good at first. Knowing that a small group of people have custody over all the trading and buying in Tether brings a bit of clarity to what could become a huge problem for Tether users. If banking interest rates also turn negative, as they have in some places, this would destroy Tether. TerraUSD has no such constraints because of the Luna coin being created and destroyed to support the Terra economy. Tether also has no automatic liquidity with other stablecoins while this has been built into the Terra blockchain.
Applying TerraUSD to industry
It is not just individuals who can take advantage of this new advance in cryptocurrencies. The local regional aspect of the Terra coins can also help industries. When an exchange rate goes south for an international company that deals in a local fiat currency, the bottom line can be affected negatively. The rate will not go negative so quickly when using a Terra coin. This is a small hedge against losing money when the international exchange rates suddenly change.
Unprecedented features and usability
The ability to trade in a local currency with more safety than the local fiat currency is a huge benefit. The ability to deposit and save on the Terra blockchain is a brand new feature. The ability to swap stablecoins in the popular fiat currencies is also an incentive that makes TerraUSD and Luna an irresistible crypto creation. While other stablecoins also offer staking rewards, the staking is often based on inflationary pressures. With TerraUSD the rewards are based on usage, not inflation. This again makes the Terra crypto-economy superior to other models.