Terra (LUNA) is a blockchain-based e-commerce platform designed to provide users with fiat-pegged stablecoins. Its primary function is to offer enhanced stability for cross-border payments. To ensure seamless transactions and maintain the stability of its stablecoins against fiat currencies, the Terra crypto network utilizes its native LUNA token. This token serves as both a utility and governance token within a staking mechanism.
Understanding LUNA’s Total Supply
The total supply of LUNA is 971 million tokens, with a circulating supply of 402 million. This represents a circulating rate of approximately 41.37%. Terra operates as a trustless, programmable blockchain e-commerce platform that offers stablecoins pegged to various fiat currencies. These stablecoins are engineered to provide high stability for international payments.
Terra relies on its utility and staking token, LUNA, along with multiple stablecoins tied to major global currencies. These include TerraUSD (UST) and others. By leveraging these stablecoins, the Terra ecosystem delivers low transaction fees, instant settlement, and a frictionless experience for cross-border transactions. This makes it particularly suited for retail payment solutions.
Digital payment systems are critical to the global economy and have been in use for decades. However, many existing systems are slow, geographically limited, and rely on outdated infrastructure and intermediaries. Terra, built on the Cosmos blockchain, aims to challenge these legacy retail payment applications.
As a comprehensive end-to-end payment solution, Terra bypasses fragmented traditional payment infrastructures. This approach allows Terra to save payment service providers hundreds of millions of dollars annually. Users also benefit from significantly discounted transaction fees, which range from 0.5% to 2%, compared to the industry standard of 2.5% to 3%.
Current LUNA Price Information
The current price of LUNA is approximately ¥0.00042, which is about $0.0000579. It is important to note that cryptocurrency prices are highly volatile and can change rapidly.
Analyzing the Value of LUNA
For Terra’s network to be effective for retail payments, its partners use Terra stablecoins. These are smart contract-based cryptographic versions of global fiat currencies, designed to minimize the volatility commonly associated with digital assets. To date, Terra has launched several stablecoins, including:
- TerraUSD (UST)
- TerraKRW
- TerraEUR
- TerraGBP
- TerraJPY
- TerraCNY
- TerraSDR (pegged to the IMF's Special Drawing Rights)
These stablecoins enable seamless cross-border value transfer and instant exchanges between each other. They also offer near-instant settlement and very low fees, making them accessible to users worldwide.
To ensure that Terra stablecoins maintain their peg to fiat currencies, the network uses LUNA in a staking mechanism. LUNA acts as a utility and governance token that supports price stability for Terra’s stablecoins. This means that the supply of LUNA is elastic, expanding or contracting based on the needs of the staking mechanism. Furthermore, LUNA is used as part of the staking process for validators within Terra’s Proof-of-Stake (PoS) consensus mechanism.
Many of Terra’s merchant partners and users access the network through Terra Station, Terra’s proprietary wallet. Terra Station supports staking for LUNA, all Terra stablecoins, and other ecosystem assets such as Anchor Protocol (ANC) and Mirror Protocol (MIR) tokens. The wallet also allows users to interact with various Terra-based decentralized applications (DApps). These interactions include swapping tokens, delegating LUNA to validators, and managing digital assets.
A set of open Application Programming Interfaces (APIs) enables merchants to integrate Terra Station for point-of-sale payments. This facilitates instant purchases and settlements. The wallet is designed to function on both mobile and web platforms.
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Frequently Asked Questions
What is the main purpose of the LUNA token?
LUNA serves as the utility and governance token for the Terra blockchain. It is used in staking mechanisms to maintain the stability of Terra’s fiat-pegged stablecoins and to secure the network through proof-of-stake validation.
How does Terra ensure the stability of its stablecoins?
Terra uses an algorithmic staking mechanism involving LUNA. The supply of LUNA adjusts elastically based on demand to help stabilize the value of Terra’s stablecoins relative to their pegged fiat currencies.
Can users earn rewards with LUNA?
Yes, users can stake their LUNA tokens to become validators or delegate their tokens to existing validators. In return, they earn staking rewards for helping to secure the network and process transactions.
What makes Terra different from other payment platforms?
Terra offers significantly lower transaction fees (0.5%–2%) compared to industry standards (2.5%–3%). It also provides instant settlement, cross-border functionality, and a seamless user experience through its integrated stablecoins and blockchain technology.
Is Terra Station the only wallet for LUNA?
While Terra Station is the official wallet, LUNA and other Terra-based assets are supported by several third-party wallets. However, Terra Station offers the most direct access to staking, governance, and ecosystem DApps.
What was the impact of the Terra ecosystem collapse on LUNA?
The original Terra blockchain underwent a significant collapse in 2022, leading to the creation of a new chain (Terra 2.0) and a new token (LUNA). The old chain and its token were renamed Terra Classic (LUNC). The analysis above pertains to the current LUNA token on the Terra 2.0 blockchain.