Learn Cryptocurrency
16 Feb 2022

Terra’s Journey To The Top: Why It’s Scaling So Efficiently

Devansh Sinhal

In a world where regular cryptocurrencies exist in tandem with stablecoins, Terra (LUNA) is a creation that combines the best of both worlds. In this article, we’ll explore how Terra utilizes and leverages the stability of stablecoins, while also being one of the fastest-growing payments options out there.

Key Takeaways

  • Terra is a blockchain protocol that offers speedy transaction settlements. It uses stablecoins that are pegged to fiat currencies to power its payments.
  • Terra LUNA is technically the first-ever blockchain protocol that truly provides users the experience of decentralization in their payments.
  • It is also the second-largest smart contracts platform after Ethereum.
  • In the past few months, the coin has climbed up the market share ladder, becoming one of the top 10 cryptocurrencies in the world.

What is Terra?

Terra is a blockchain protocol that offers speedy transaction settlement. It uses stablecoins that are pegged to fiat currencies to power its payments. Fiat currencies are relatively stable in prices, and hence more suitable for use across countries. Terra, and its native token LUNA, combine the stability of these currencies with the blockchain capabilities of Bitcoin to address problems efficiently.

Origins

Terra Luna was founded in January 2018 by founders Do Kwon and Daniel Shin. Daniel Shin had previously been involved in building one of the biggest e-commerce platforms in Asia, and Kwon was a founder of a successful organization that built decentralized applications.

The creators wanted to make blockchain payments accessible to every user of traditional finance services and, at the same time, make people aware of the massive advantages such payments provide to regular users. In doing this, they didn’t ignore fiat currencies completely, given the currencies’ importance to finance structures back then. 

The creators believed that the existing problems in global payments couldn’t be adequately addressed just by making incremental improvements. A robust change needed to happen, and it was coming with the blockchain.

Terra was thus created to facilitate the mass adoption of cryptocurrencies and serve as a user engagement platform. It would be able to make global payments possible by scaling blockchain payments while leveraging the price stability of major fiat currencies, and also incorporating blockchain-level security into its system.

The idea of Terra was conceived during a time when most payments innovations were bootstrapped by larger corporations. It was born with the support of the Terra Alliance, a group of 15 large e-commerce companies operating in Asia. The companies involved collectively processed more than $25 billion every year at the time. They also had more than 45 million users, a number that kept on increasing every year since.

Terra’s USP

Terra clearly aims to become one of the biggest in the world by virtue of the several advantages it brings to its stakeholders. It offers significant and tangible benefits to merchants and customers preferring their payments structure over traditional methods like credit card networks, banks, and online payment getaways. Another attraction for stakeholders is the significantly cheaper transaction fee (compared to both banks and Bitcoin).

How Does Terra Work?

The main focus of Terra, as we know, is stablecoins. The latter are cryptocurrencies whose values are tied to fiat currencies like the US Dollar or the Euro. Although these stablecoins have all the functionalities of a traditional crypto coin, they don’t fluctuate with the market as much. Some popular stablecoins are Tether (USDT), USD Coin (USDC), DAI (DAI), and Terra USD (UST). 

Terra uses the unique advantage that stablecoins provide to leverage global payments. While people might be hesitant to use other crypto coins like Bitcoin to send payments because of their short-term volatility, Terra appears to be a much easier choice.

Apart from global payments, LUNA holders can also stake their tokens on the network to earn staking rewards. As LUNA is a Proof of Stake coin, the network uses staked coins to verify transactions without Proof of Work. This makes the network easier to scale, and incentivizes users to pledge their coins for a regular block reward proportional to their stake.

Functionalities of LUNA

Terra also uses a savings and lending protocol called Anchor. Anchor allows users to lend their stablecoins on the platform, for a fixed interest rate (usually 20%), to those interested in borrowing them.

Terra has a lot of institutional support too. Multiple e-commerce platforms, operating in 10 different countries, have backed them up. It also recently announced a partnership with Chai, a South Korea-based mobile payments app, in which purchases made are routed through the Terra blockchain network.

Journey To The Top

In the past few months, the coin has climbed up the market share ladder, becoming one of the top 10 cryptocurrencies in the world. As of 14 February 2022, Terra has a market cap of more than $20 billion.

Recently, a lot of staking and locking of LUNA funds on Terra has resulted in the token’s price shooting up. The Total Value Locked (TVL) surged by 55%. The number represents the number of assets currently staked on the platform and indicates a surge in the efficiency of transactions, as well as investor confidence.

Being the first cryptocurrency that’s accessible enough for people to use every day, it has a huge edge over traditional coins like Bitcoin which have high fees and slow verification rates. Terra LUNA is technically the first-ever blockchain protocol that truly provides users the experience of decentralization in their payments. It is, at the same time, also the second-largest smart contracts platform after Ethereum.

More significantly, LUNA is also being used by traders on major exchanges to hedge their bets against more volatile cryptocurrencies. That, in addition to Terra’s burn mechanism, has contributed significantly to its meteoric rise over the last couple of months.

Wrap-Up

The best app to use to invest in Terra LUNA in India is CoinSwitch. Our trading platform is very accessible and makes investing easy for Indian investors and traders.

Check out CoinSwitch on our website, or download the Android or iOS app directly.

If you want to buy LUNA directly on our exchange, click here.

If you want to convert your INR or LUNA directly into one or the other, click here to get redirected to our convert page.

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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Devansh Sinhal

Content Writer

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