Benefiting from the rise of the Decentralized Finance (DeFi) ecosystem, Terra and Ethereum have emerged as the two biggest and most discussed blockchain networks in the crypto market. Terra, in particular, is rapidly making advancements in product launches and driving mainstream adoption of crypto assets.
As per analytics platform Defillama.com, the total value locked across the Terra ecosystem has crossed $16 billion, as of 15 February 2022, making it the third-largest blockchain network in the world after Ethereum and Binance Chain.
In this article, we will be comparing Terra and Ethereum, in an attempt to understand the features that make each of them unique.
- Ethereum is the largest and world’s first programmable blockchain platform
- Ethereum is the pioneer in smart contracts technology and has expanded the use case of blockchain technology
- Terra is an open-source blockchain platform focusing on the development of the DeFi ecosystem
- Terra’s stablecoins tracks the price of fiat currencies, but the prices are algorithmically stabilized
- The native token of Terra is LUNA, which is a deflationary crypto asset, whereas, ETH is an inflationary crypto asset
Ethereum vs Terra: An Overview
What is Ethereum?
Ethereum is an open-source, public blockchain platform with smart contract functionality. It establishes a Peer-to-Peer (P2P) network that securely executes transactions without involving third-party intermediaries.
Much like the Bitcoin blockchain, the transactions processed on the Ethereum blockchain network are immutable, verifiable, and securely distributed across the network.
The Ethereum blockchain allows the building of decentralized applications (dApps) on the top of its network by using its native programming languages, Solidity and Ethereum Virtual Machine (EVM). Each dApp built on the Ethereum blockchain can have its own token, based on the ERC-20 token standard, for trading in the crypto market. Convert ETH to INR in real-time!
What is Terra?
The other major DeFi player in the crypto ecosystem, Terra, is an open-source blockchain payment platform. It allows developers to build next-generation DeFi applications on its platform.
Its unique blockchain architecture enables people to instantly spend, save, trade, and exchange crypto assets without worrying about volatility.
Its flagship stablecoin, UST, is pegged to the US Dollar (USD). However, UST tokens are unlike other stablecoins, like Tether, which are pegged to conventional fiat USD and are backed by an equivalent amount of USD. Instead, Terra uses its native coin LUNA to mint UST and algorithmically stabilize its price.
To mint UST tokens, a certain percentage of the LUNA tokens are burned permanently. So if the demand for UST rises, more LUNA will be automatically burned, which helps stabilize the former’s price and contribute to a rise in the latter’s value.
And, every time someone uses UST to pay their bills, the transaction fee generated is distributed to LUNA token holders.
Many innovative next-generation DeFi applications similar to UST tokens are developed on the Terra blockchain.
The Teams Behind the Projects
Ethereum was conceptualized by crypto and blockchain visionary Vitalik Buterin. He wrote the Ethereum whitepaper in 2013 at the age of 19, and the platform was launched in July 2015.
It is the second-largest blockchain network in the world, after Bitcoin, with the most active core developers, making it the most actively developed crypto project in the market.
Terra was launched in January 2018 by a South Korean blockchain startup, Terraform Labs. It is engaged in developing financial dApps and making DeFi accessible to everyone on the planet, growing the real GDP of the blockchain economy.
Some of the prominent Virtual Capital (VC) investors in Terraform Labs include Pantera Capital, Kinetic Capital, Coinbase Ventures, and Arington XRP Capital.
The primary difference between Ethereum and Terra is in relation to their functionality.
Ethereum is a blockchain development platform that allows developers to build and run dApps and other decentralized products like Non-Fungible Tokens (NFTs) and GameFi applications. Ether (ETH) is the native coin that fuels the Ethereum blockchain and is traded across crypto exchanges globally.
Terra is a public blockchain protocol that primarily focuses on developing the DeFi ecosystem. LUNA is the native coin of the Terra blockchain. Terra boasts of features like smart contract functionality and cross-chain interoperability.
The cross-chain interoperability function allows blockchain networks to communicate with other blockchain networks.
Ethereum is currently a proof-of-work network, although it will switch to the energy-efficient proof-of-stake consensus mechanism with the launch of ETH 2.0 soon. Terra, on the other hand, uses a delegated proof-of-stake consensus mechanism. It is based on Tendermint, where a set of validators are responsible for committing new blocks in the blockchain.
Read here: What is crypto staking?
Ethereum is the second-largest crypto by market capitalization and has inflationary coin economics. In other words, there is no fixed supply of Ether (ETH) tokens in the market, and the current block reward is 2 ETH. With an average block creation time of 14–15 seconds, the total annual supply of new ETH tokens ranges between 4.5 and 5 million coins.
However, with the recent implementation of the EIP-1559 protocol upgrade, Ethereum burns the transaction fee collected from users, making ETH less inflationary.
LUNA has a genesis supply of 1 billion tokens, of which almost 50% is held by Terraforms Labs and its employees, and Terra Alliance partners.
The current circulating supply of LUNA in the market is close to 397 million coins, and the total supply is 811 million coins.
As a small percentage of LUNA tokens are burned to create UST stablecoins, the supply of LUNA has reduced over the period, making it a deflationary coin. To date, close to 87 million LUNA tokens have been burned to mint UST coins.
Popular dApps on Ethereum and Terra
Ethereum is preferred by most blockchain developers, because of its rich set of development tools and highly decentralized Ethereum Virtual Machine (EVM). The platform’s continuous evolution over the years with the changing trends.
Currently, the total market capitalization of all dApps built on the Ethereum platform has crossed $600 billion, making it the largest blockchain network.
To know more about how Ethereum is revolutionizing the crypto ecosystem, read here.
Some of the popular dApps on the Ethereum blockchain are Chainlink, Axie Infinity, Polygon, Decntraland, Loopring, and Basic Attention Token. And popular DeFi apps on Ethereum include Uniswap, Maker, CurveDAO, AAVE, Compound, and Synthetic, among others.
You can find some of the leading DeFi protocols—such as Mirror protocol, Mirror wallet, Loop Markets, Apollo DAO, and OpenSea—on the Terra ecosystem.
An interesting DeFi application on Terra blockchain is Chai, an instant payment app for making everyday payments in crypto coins. The app is used by over 2 million users in South Korea currently.
Main Differences: A Brief Recap
Ethereum is one of the revolutionary and most innovative crypto projects to have introduced multiple real-world use cases (apart from P2P payments) of its blockchain technology.
Since its launch, Ethereum has evolved a lot as a crypto project and is consistently ranked as the second-largest crypto asset by market capitalization, with a market dominance of over 20%. At the time of launch, ETH was valued at less than $1, but its value has grown over 3,500 times since. It touched an all-time high of $4.735 in November 2021.
Ethereum is the most actively developed crypto project. It has the highest number of development commits, followed by Cardano and Bitcoin. The launch of ETH 2.0 will be the next major development in the Ethereum ecosystem and is expected to trigger its next phase of growth.
While Terra is a new crypto project compared to Ethereum, it is making steady progress. It is one of the widely accepted crypto payments firms in South Korea now, and has plans for global expansion.
UST is the third-largest stablecoin by market capitalization, and LUNA is at the 10th spot. Since its launch, LUNA has grown over 50 times its initial value, reaching an all-time high level of $99.72 in the market rally of 2021.
Terra aims to establish a new order in the traditional financial space by eliminating intermediaries and giving more financial power to the people.
VC investors have already pledged over $150 million to Terraform Labs to incubate various crypto projects, which will contribute to the growth of the Terra ecosystem.
The primary difference between Ethereum and Terra is the use cases of the platform. While Ethereum enables the creation of all components of the decentralized ecosystem, Terra focuses only on the DeFi segment.
Both are fundamentally strong crypto projects, but in terms of acceptance and growth, Ethereum is way ahead. If you want to buy ETH, you can find it at the best rate with CoinSwitch. However, in the long term, increased mainstream adoption of cryptos will directly benefit both cryptos.
Download the CoinSwitch app and start exploring Ethereum and Terra, and other development in the DeFi ecosystem.
Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user's own risk.
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