Terra Luna has been one of the best performing cryptocurrency assets of the last year.
In this guide, we will discuss its features, properties and how it is different from some of the more mainstream digitals assets, especially Bitcoin. Let’s start off with some definitions.
What is Terra Luna?
Terra is a blockchain-based decentralized finance protocol used to mint, manage and trade stablecoins tied to various fiat currencies. So far the most popular stablecoin issued on the Terra protocol is the USD variant dubbed UST.
Luna, on the other hand, is the Terra ecosystem token for staking and governance, which also plays a crucial role in maintaining a stable value of stablecoins issued on the network.
The latter function works as follows: a user burns their LUNA tokens to receive an equivalent token in a supported stablecoin version such as the UST or TerraKRW (KRT) tied to the South Korean won.
All supported fiat currencies have to be voted by the LUNA holders.
What is Bitcoin (BTC)?
Bitcoin is a peer-to-peer digital currency that heralded the blockchain revolution in 2009. The network is referred to as Bitcoin while the native currency is also called bitcoin (small letter ‘b’) with the ticker symbol ‘BTC.’
Unlike Terra, Bitcoin has only one coin issued on the network which is used to settle digital payments. It does not hold a stable value nor is it pegged to any fiat currency.
Also read Terra Luna Vs Solana
Terra (LUNA) vs Bitcoin (BTC): Key Takeaways
Here’s a brief rundown of the differences between Terra Luna and Bitcoin.
The biggest difference between the two blockchain networks lies in the way they each consensus. With Terra, the project deploys the less popular DPoS mechanism, a version of staking while Bitcoin uses the trusted and extensively-proven PoW mining.
Terra LUNA’s layer-1 blockchain is based on the Cosmos SDK the same development toolkit used on the Cosmos and Binance DEX networks. As a result, Terra also adopts the Tendermint protocol which makes the basis for the DPoS consensus mechanism.
Frequently Asked Questions
What Is The Relation Between Luna And Bitcoin?
Terra Luna and Bitcoin are both innovative cryptocurrency networks. When Bitcoin launched in 2009, it introduced the much-needed solution to the double-spend problem.
However, with its popularity, so has grown its challenges of maintaining a stable (or a relatively steadier) value.
Terra was created as a way to solve this volatility problem by introducing a self-correcting stablecoin based on fiat currencies.
The Terra stable coins can now be used to achieve the initial goal of Bitcoin, which is to act as a digital currency.
Is Terra Luna Good Investment?
Terra’s LUNA cryptocurrency can be a good investment depending on an investor’s goals.
Maybe one wants to support Terra by contributing to its development and maintenance. Or, perhaps, they just want to profit from the price volatility of the asset.
Whatever the investor’s goal, it will determine how to gauge the investment prospect of LUNA including the timing of the investment i.e., when to buy and how long to hold.
Looking back at the coin’s short history, investing in the project over the last couple of years has paid off handsomely.
Although past price action does not necessarily contribute towards future movements, some may argue that the coin has attracted the kind of market interest that may propel it higher over the coming months and years.
What Makes Terra Luna Special?
Terra Luna is important because it helps solve one of the biggest challenges faced by most cryptocurrencies – market volatility. This problem prevents the assets from begin adopted for everyday payments.
For instance, even though Bitcoin was introduced as an alternative to fiat payments, its market volatility quickly became a problem.
Using BTC as a settlement method for time-based contracts such as loans, wages and several financial instruments could disadvantage one of the parties to the contract.
Terra helps solve this problem by issuing stablecoins whose value is pegged to fiat currencies such as USD, EUR or JPY. This way, the users can take advantage of decentralized finance while using an asset whose value is more predictable over a given period.
LUNA, the native cryptocurrency asset on the Terra ecosystem is the asset used to stabilize the value of the stable coins minted on the Terra platform.
Learn more: Terra Luna Vs Polkadot
Is Terra Luna Deflationary?
Yes, Terra’s LUNA token is a deflationary asset because its total supply reduces following every seignorage event. According to Terra, seigniorage is the value of the stablecoin minted less what it costs to mint it.
To create a Terra-based stable coin such as UST, LUNA tokens have to be converted into UST through seignorage.
A portion of the LUNA token is burned from circulation while the rest is held in a community pool. Every time this event happens, less LUNA remains in circulation thereby reducing the total available tokens in the market.
Is Terra Luna A Blockchain?
Yes, Terra is an independent blockchain network based on the Cosmos SDK (software development kit).
The network relies on the Delegated Proof of Stake (DPoS) consensus mechanism whereby LUNA token holders can delegate their tokens to transaction validators for a portion of the rewards that the delegates receive.
Read more about this topic in Luna Proof of Stake guide.
Is Terra Built On Ethereum?
No, Terra Luna is a native cryptocurrency on the Terra blockchain, an independent blockchain from Ethereum.
It is based on the Cosmos SDK and relies on the DPoS staking mechanism to achieve consensus within its nodes. This is unlike Ethereum which is currently using the highly criticized Proof of Work (PoW) mining.
How To Get Terra Luna Coin?
Terra LUNA can be bought off any of the leading cryptocurrency exchanges including:
- Crypto.com, etc.
Terra Luna is an innovative project that complements Bitcoin, especially where the flagship cryptocurrency falls short.
It is easily accessible on leading crypto trading platforms and currently has a convincing investor proposition. In less than two years, the network has grown from relative obscurity to occupy a spot among the ten most valuable digital assets.
As the cryptocurrency market grows, there is a huge possibility that Terra Luna keeps on growing with it and if that’s the case, then investing in LUNA right now could be a good investment choice.