Terra —— An Algorithmic Stablecoin Platform
- Terra is an algorithmic stablecoin platform, operating on a Proof of Stake (PoS) blockchain infrastructure built with Tendermint.
- LUNA is the token of the Terra platform and is used in the issuance of stablecoins (TerraSDRs), as a price stability mechanism, as well as for staking and network governance.
- In order to stabilize the value of TerraSDRs with their respective pegged currencies, users can redeem LUNA tokens in exchange for TerraSDRs and vice versa.
- Terra has a family of stablecoins, each of which is anchored to mainstream fiat currencies. The stability mechanism of the stablecoin family adjusts supply according to demand.
- The Terra protocol tries to achieve predictable rewards for network participants in all economic conditions - using transaction fees and the rate of LUNA burn (with an equilibrium supply of 1 billion LUNA) as levers to oppose changes in unit mining rewards.
Terra is a blockchain protocol that uses fiat-pegged stablecoins to power price-stable global payments systems. According to its white paper, Terra combines the price stability and wide adoption of fiat currencies with the censorship-resistance of Bitcoin (BTC) and offers fast and affordable settlements.
Development on Terra began in January 2018, and its mainnet officially launched in April 2019. As of September 2020, Terra comes from South Korea and is the world's first government-supported stablecoin project. Its mission is to build a new financial infrastructure. Terra consists of the following parts:
Luna: Terra's native mortgage assets. It is not only the collateral of the entire Terra economic network, but also the pledge token of PoS. Of course, Luna can also be used for the governance of the Terra network, including proposals and voting.
Stablecoin family: Currently, Terra stablecoin family members include: KRT (pegged with the Korean won), UST (pegged with the U.S. dollar), MNT (pegged with the Mongolian Turkic coin), SDT (with the IMF SDR Organization of special drawing rights anchoring), more stablecoin members will be added in the future.
Chai payment application: At present, more than 3% of South Koreans use Chai to pay for goods and services. The scope of use includes Korea's number one online travel agency, bookstore, game publisher, convenience store, e-commerce website, etc.
Anchor: Anchor is a DeFi protocol that allows Terra stablecoin deposits to earn stable yield,
powered by block rewards of leading proof-of-stake blockchains. It will provide principal protection, instant withdrawals and stable high annual interest rates.
Terra was founded in January 2018 by Daniel Shin and Do Kwon. The two conceived of the project as a way to drive the rapid adoption of blockchain technology and cryptocurrency through a focus on price stability and usability. Kwon took on the position of CEO of Terraform Labs, the company behind Terra.
Prior to developing Terra, Shin co-founded and headed Ticket Monster, otherwise known as TMON — a major South Korean e-commerce platform. He later co-founded Fast Track Asia, a startup incubator working with entrepreneurs to build fully functional companies.
Kwon previously founded and served as CEO of Anyfi, a startup providing decentralized wireless mesh networking solutions. He has also worked as a software engineer for Microsoft and Apple.
In addition, other Terra team members have excellent technical and business abilities.
Terra has a family of stablecoins, each of which is anchored to mainstream fiat currencies. The stability mechanism of the stablecoin family adjusts supply according to demand. Let's take KRT as an example (Terra stablecoin anchored with KRW) to explain this mechanism.
Suppose that the demand for KRT increases, causing its price to rise, even exceeding its anchor price of KRW. In order to adjust the price of KRT back to the normal anchor value, the system will provide many arbitrage opportunities as incentives to increase the supply of KRT liquidity. (The increase in supply will dilute the value of KRT, thus bringing the price back to the appropriate anchor value)
The realization of this mechanism is to increase the supply of KRT by allowing users to send Luna worth 1 KRW to the system (Luna will be destroyed), and then obtain 1 KRT (new KRT is generated, and seigniorage will be generated), thereby increasing the supply of KRT. The difference of KRT's deviation from the anchor value will be reflected in the profit obtained by users who sell their KRT (at the actual KRW price) on the exchange. This mechanism stimulates spontaneous arbitrage opportunities, so that more KRT enters the circulation and pulls KRT back to the anchor value.