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What is Terra (MOON)? A Beginner’s Guide

What is Terra (MOON)? A Beginner’s Guide

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What is Terra LUNA Classic (LUNC)?

LUNA Classic (LUNC) is the original Terra LUNA coin left over after the recent collapse of UST/Luna and the establishment of a new Terra chain. Kwon’s recovery plan included the creation of an entirely new chain on which future transactions would take place. The old chain was split into the LUNA Classic and Terra chains. Terra will be the name of the new chain (known as LUNA 2.0), and LUNA Classic (LUNC) is the native token of the original Terra LUNA blockchain.

The term “classic” is likely a reference to the Ethereum and Ethereum Classic hard fork that occurred after the Ethereum decentralized automated organization (DAO) breach in 2017. This appears to be another ploy to promote the UST crash as ” Terra’s DAO hack moment,” as Kwon said.

The previous version of the Terra protocol was extended to offer support for stablecoin developers to build Terra decentralized finance (DeFi) projects. The project consisted of two cryptocurrencies: Terra and LUNA. Terra was the stablecoin standard pegged to fiat and other currencies. For example, TerraUSD (UST) is pegged to the US dollar, while TerraKRW (KRT) is pegged to the South Korean won. 

The native token, Terra (LUNA) was the governance and staking asset of the network. Users bet on LUNA to win a place in government and become validators and get rewards. Users can also burn LUNA to mint Terra’s UST token or one pegged to their local fiat. However, it is important to note that while these stablecoins are pegged to the value of fiat currency, they are not backed by fiat currency. Instead, the LUNA token was considered an algorithmic stablecoin. 

An algorithmic stablecoin is an asset that gains value through a set of rules rather than being tied to an asset itself. This method allowed Terra users to invest in the price of these pegged coins without the need to hold their physical counterparts.

However, the so-called UST stablecoin de-pegged on May 9, after nearly 18 months of holding its value against the US dollar. The decoupling created a chain reaction that resulted in the crash of UST and the Terra (LUNA) cryptocurrency and Bitcoin and the larger crypto sector, which has yet to fully recover.

This article will discuss the history of the Terra blockchain, Terra LUNA 2.0, and the difference between LUNA 2.0 and LUNA Classic.

What is Terra Luna 2.0?

Terra 2.0 is the latest version of Terra (LUNA), which is what Do Kwon has come up with as a regeneration strategy. The goal is to propose a fork of the Terra blockchain and an airdrop to crypto investors who have been affected by the recent market downturn. The main objective is to restore confidence in this stable coin through the new company of the Terra ecosystem.

Terra 2.0 policy occasionally issues additional LUNA tokens to crypto investors who bought more than 10,000 LUNA before the catastrophic damage to this stablecoin. It will help keep Terra 2.0 from selling out right away. More than 300% of crypto investors’ LUNA tokens will be unlocked at once, and the remaining 70% will be issued for two years. These crypto investors will receive the new Terra 2.0 tokens after six months.

How does MOON 2.0 work?

To validate transactions on the Terra 2.0 cryptocurrency blockchain, a typical Proof-of-Stake (PoS) consensus mechanism is used. A total of 130 validators participate in network consensus at any given time, with voting privileges determined by the number of LUNA 2.0s connected to each node. Gas fees and a LUNA 2.0 fixed annual inflation rate of 7% are used to produce rewards.

By delegating LUNA 2.0 tokens to a validator of their choice, LUNA 2.0 token holders participate in the consensus. Validators, like delegates, frequently place their own bet. Therefore, before awarding prizes to delegators, the validation node keeps a commission in this scheme.

The incentives generated by Terra 2.0 coin delegators differ, depending on the voting power of the validators. That said, those with more voting power naturally earn more rewards, but they need to be spread out among a larger group of delegators.

Delegation can be done using the Terra Station interface, but be aware that it comes with a risk. For example, validators can be penalized for misbehaving, resulting in the split of LUNA 2.0 Reframed. The reduction can occur even if the validators are mistakenly turned off for a short period of time.

History

Terra was founded in 2018 by Do Kwon and Daniel Shin and launched its mainnet in 2019. Kwon and Shin built Terra to offer users the stability of fiat currencies while harnessing the power of technology blockchain for faster and cheaper deals. than traditional payment solutions. The two founders also believed that such options would increase blockchain adoption.

The Terra Alliance backs Terra. The Terra Alliance is a group of companies and e-commerce platforms from around the world driving the adoption of Terra. Companies within the Terra Alliance have a combined value in the tens of billions and more than 45 million customers across all companies.

What is the difference between LUNA 2.0 and LUNA Classic?

Despite their striking resemblance, LUNA Classic and LUNA 2.0 are not the same. The Terra network has been divided into two chains according to the new governance plan. Terra Classic with Luna Classic (LUNC) tokens will be the old chain, while Terra with LUNA tokens will be the new chain called LUNA 2.0. 

The old LUNA will co-exist with LUNA 2.0 instead of being completely replaced. Any decentralized applications (DApps) released for Terra Luna will be favored by LUNA 2.0, and the development community will start building DApps and providing utility for the new token. However, it does not include an algorithmic stablecoin.

However, this does not rule out the possibility of Terra Classic losing its community as many investors and merchants oppose Do Kwon’s restoration plan and the new chain. In truth, Terra Classic retains a sizable following, and the classic community has agreed to start burning as many LUNC tokens as possible in order to reduce the coin supply and increase the prices of individual tokens.

Is Terra Luna 2.0 safe?

One hundred and thirty active PoS validators protect Terra LUNA 2.0. Given the calamity that befell the previous iteration of LUNA, investors in the crypto world have legitimate reservations about the coin’s stability. Since its launch, there has been no evidence of hacking or scams, but investors should be aware of the risks before committing funds to LUNA 2.0.

The crypto market is highly volatile and the lack of regulation makes it riskier than the traditional stock market. So, do your due diligence on blockchain-based projects before investing your hard-earned money.

Should you invest in Terra LUNA 2.0?

LUNA was a growing powerhouse within the DeFi space before the collapse of the Terra ecosystem. In December 2021, Terra overtook BNB Smart Chain to become the second largest DeFi protocol with over $20 billion locked into the network through its applications.

However, the algorithmic stablecoin UST and its sister coin LUNA failed during the Terra ecosystem crash and their prices plummeted, leading investors to lose confidence in smart contracts and algorithm-based cryptocurrencies.

Should I invest in LUNA 2.0 based on stats or past performance? That depends on the individual buyer. Each investor has their own objectives and risk-return trade-offs with respect to the project they are willing to invest in. Therefore, they should do their research before investing in digital assets.

How to buy Terra LUNA 2.0 tokens?

Those wondering where to buy Terra LUNA 2.0 tokens should understand that they will need to use a cryptocurrency exchange to exchange their fiat money for LUNA. Since LUNA was relaunched after the collapse of UST, it was withdrawn from many exchanges and has yet to return to all of them.

However, many of these exchanges, such as Binance, KuCoin, Crypto.com, and eToro, still feature the LUNA 2.0 token exchange. Almost all exchanges follow the same steps, such as signing up, deciding how to deposit funds, choosing the investment amount, and selecting the wallet to store your funds. The four easy steps outlined below will show you how to buy LUNA 2.0 on the Crypto.com exchange in a matter of minutes.

Can you bet Terra LUNA 2.0?

After purchasing LUNA, holders can bet on cryptocurrency exchanges like Binance. Make sure you have LUNA in your wallet before placing a bet. To achieve this, please follow the steps below:

All of the above steps will help you stake your LUNA 2.0 tokens and earn rewards for staking.

The future of LUNA 2.0

The future of LUNA 2.0 is impossible to predict with complete precision, considering the collapse of its UST stablecoin. Previously, LUNA hosted some very popular DeFi projects, although there are not many to speak of at the moment. Terra overtaking Binance Smart Chain (now BNB Chain) to become the second most popular DeFi platform is also not something to be ignored.

However, the future cannot be predicted based on past events. The success of Terra LUNA 2.0 depends on the performance of the new chain and its efforts to regain investor confidence. Of course, it is always possible that Ethereum’s eventual upgrade to PoS could outperform competitors like Terra, as Ethereum has more mind share than any other project. But nothing is certain until the Ethereum implementation is complete. 

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