LUNA coin was once very popular and once became the third largest cryptocurrency in the currency circle. However, the token suffered a major crash in May 2022, with the currency price falling almost to 0, causing many investors to lose all their money. Although the Terra project team and its founder Do Kwon once wanted to rescue Luna, so far, the token's performance is still not very impressive. So, does this mean LUNA coin is not worth investing in? Is there no way to save it?
This article will introduce you to LUNA and its stablecoin UST in detail, analyze the reasons for the collapse of LUNA, and analyze and predict the future of LUNA.
What is Terra (LUNA Coin)?
Terra is a trustless programmable blockchain e-commerce platform launched by South Korea’s Do Kwon that provides fiat-pegged stablecoins to provide greater stability when making cross-border payments.
Terra relies on its utility and staking token LUNA, as well as several other stablecoins pegged to many of the world’s top fiat currencies, including TerraUSD (UST). Through the use of stablecoins, the Terra crypto ecosystem provides low fees, instant settlement and frictionless cross-border exchange to power retail transactions.
The background to the founding of Terra
The mainnet launch of the Terra public blockchain network took place on April 24, 2019, and the project was originally founded by two Korean entrepreneurs in January 2018. One of them is Daniel Shin, the founder and CEO of TMON, one of South Korea’s largest e-commerce platforms, a company that was a considerable driving force behind Terra’s launch. Another Korean entrepreneur is Do Kwon, who previously led another startup called Anyfi but serves as CEO of Terra Labs, the company behind Terra.
How the Terra Chain works: LUNA and UST: The Terra protocol runs on its blockchain, which means it does not rely on other blockchains such as Ethereum. In addition, its system integrates a proof-of-stake (PoS) consensus mechanism powered by the Cosmos SDK and Tendermint blockchain. This means that validators running multiple nodes can complete transactions in exchange for rewards.
Additionally, validators and stakeholders can participate in the platform’s consensus and have voting rights proportional to the shares they represent to govern the network’s operations. 130 active authenticators using LUNA were also selected to protect the network. Terra also enables developers to use its platform to launch decentralized applications (DApps) on its blockchain.
Terra Stablecoin TerraUSD (UST) is an algorithmic stablecoin, which means the protocol relies on algorithms to maintain price stability. The mechanism between UST and LUNA coins is that 1 UST and 1 US dollar worth of LUNA can be exchanged for each other. When the price of 1UST is greater than 1 USD, investors can purchase 1 USD of LUNA to mint new 1UST and earn the price difference; when the price of 1UST is lower than 1 USD, investors can buy LUNA at a low price. Buy 1UST in exchange for 1LUNA worth $1.
For example, when the price of 1UST is US$1.5, investors can buy LUNA worth US$1, and then exchange it for 1UST and sell it, getting a price difference of US$0.5; conversely, when the price of 1UST is US$0.5, investors can spend US$0.5 Buy 1UST, get 1 USD worth of LUNA coins and sell it. Through this mechanism, the rarity of LUNA coins and the price stability of UST can be maintained. LUNA coins can be used to pay handling fees or participate in the governance of the Terra ecosystem.
Users wishing to mint Terra stablecoins must burn USD equivalent to the value of LUNA. So you can mint LUNA in exchange for stablecoins and send the tokens to the community treasury, allowing the network to profit from stablecoin minting, which is called seigniorage. It is similar to the seigniorage program used by central banks to profit from the printing of fiat currency.
Reasons for the collapse of LUNA currency
The main reason for the collapse of LUNA coin was the failure of its stablecoin UST. UST was originally designed as a stablecoin pegged to the U.S. dollar, but failed to remain stable amid market fluctuations, resulting in large amounts of LUNA being minted, further diluting its value. This vicious cycle eventually caused the price of LUNA coin to collapse.
The latest 2024 LUNA currency news: According to foreign media Cointelegraph reported on May 31, Terraform Labs and its CEO Do Kwon are reaching a settlement with the SEC, and the two parties are expected to submit final terms for court approval by June 12. Spurred by the news, LUNA once rose nearly 40%, breaking through $0.8 before falling back. It should be noted that if the SEC no longer files charges, Do Kwon will still face criminal charges in South Korea and the United States.
LUNA Coin’s Future Prediction
Although LUNA Coin has experienced major setbacks in 2022, the technology and ecosystem behind it still have some potential. With the settlement between Terraform Labs and the SEC, market confidence in LUNA may be restored. However, investors still need to be cautious as the future of LUNA Coin remains uncertain.
In summary, LUNA coin was once a star in the cryptocurrency market, but its collapse has left investors doubtful about its future. Still, with Terraform Labs’ settlement with the SEC and the potential of the technology behind it, there’s still a chance that LUNA Coin will rise again in the future. Investors should comprehensively consider market dynamics and their own risk tolerance when making investment decisions.
in conclusion
The collapse of LUNA coin has left many investors doubtful about its future, but the technology and ecosystem behind it still have potential. With the settlement between Terraform Labs and the SEC, LUNA coin is likely to rise again. However, investors should comprehensively consider market dynamics and their own risk tolerance when making investment decisions. Hopefully this article will help you better understand LUNA Coin and its future potential. Good luck with your investment!