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Terra Luna Vs. Wrapped Luna (Compared)

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This article was written before the Luna Crash.

Terra is an open-source, decentralized finance protocol used to mint and manage algorithmic stable coins. But there’s also a wrapped version, which represents the token on a non-native blockchain, namely Ethereum.

This guide looks at the difference between Terra’s native platform token LUNA and its derivative sibling, Wrapped LUNA (WLUNA). The two might confuse beginners, but you’ll learn their differences and how to tell them apart.

What is Terra (LUNA)?

Terra was created in 2018 and launched on the mainnet in January 2019. Its native platform token is LUNA, an instrumental asset within the Terra ecosystem.

Its main task is to stabilize the price of the various Terra stablecoins and governance of the network.

LUNA holders stake their assets for passive income or become validators by running a transaction validation node.

However, most importantly, LUNA stakeholders can propose and vote on improvement proposals that affect the governance of the blockchain.

Read more: Is Terra Luna Environmentally Friendly?

What is Wrapped LUNA (WLUNA)?

Wrapped LUNA is a representative token on the popular Ethereum blockchain that tracks the value of the original LUNA coin.

WLUNA is based on ERC-20 standards for minting tokens on Ethereum, giving it utility with Ethereum-based Defi protocols and decentralized exchanges.

1 WLUNA equals 1 LUNA.

Terra (LUNA) vs. Wrapped LUNA (WLUNA): Key Takeaways

Here’s a quick rundown of the differences between LUNA and WLUNA.

Despite the differences in their technical underpinnings, LUNA and WLUNA have the same price. The aim of having WLUNA is to enable Ethereum users to interact with LUNA on the native Ethereum ecosystem giving the coin more utility outside Terra.

Read more: Terra Luna Vs. Cosmos

Frequently Asked Questions

What Is The Relation Between Luna And Wrapped Luna?

The two assets are essentially the same, only they exist on two different blockchains.

Terra Luna is a native platform token on the Terra blockchain, while Wrapped Luna is a derivative token existing on Ethereum. WLUNA tracks the price of Terra Luna using algorithmic incentive processes.

Whenever the price of either asset varies, arbitrage traders will come in to profit from the price difference. They will buy the cheaper version, mint, or redeem the other variant and sell the more expensive one for a profit.

As more arbitrage traders seek to profit off this price discrepancy, they will reduce the supply of the cheaper variant while increasing its demand. So, the price will rise, thereby eliminating the profit margin.

Read more: Terra Luna Vs. Terra USD?

Should You Buy Terra Luna Or Wrapped Luna?

Whether you should buy LUNA or WLUNA depends on your needs. LUNA is the native token on the Terra ecosystem and can be used in Terra for various functions, including staking, paying gas fees, and governance, among others.

Wrapped LUNA has utility in the Ethereum ecosystem, being the largest dApp platform with some of the leading decentralized finance (Defi) applications.

WLUNA can be lent, borrowed, traded, or even stored on Ethereum wallets such as MetaMask.

You may also need the two assets to participate in various profitable activities on Terra and Ethereum. In that case, acquiring both Terra LUNA and Wrapped LUNA will be the best option.

What Can You Do With Wrapped Luna?

Wrapped Luna does not have the same utility that Terra Luna has. You can’t use it the Terra ecosystem and neither can it be stored or staked on native Terra wallets such as Terra Station.

However, since it is a wrapped token on the Ethereum blockchain, it has several other applications. They include:

  • Defi token: It can be saved, lent, and borrowed on the vibrant Ethereum Defi ecosystem.
  • Value transfer: similar to all cryptocurrencies, WLUNA can be used as a payment method;
  • Speculation: WLUNA can be traded on exchanges such as Coinbase for a profit or it can be bought and held over a relatively long period.

Also read: Terra Luna Vs. Atom

Can You Transfer Wrapped Luna To Terra Station?

No, you cannot directly send or transfer your Wrapped LUNA tokens from an external wallet to Terra LUNA’s official wallet Terra Station. This is because Terra Station does not support tokens created on blockchains other than Terra.

Wrapped Luna being an ERC token on the Ethereum network, has to be converted from an ERC token to the original LUNA coins using the Terra bridge.

There is the option to use applications or exchange platforms that support the conversion or redemption of ERC-based WLUNA to Terra Luna similar to using the decentralized Tera bridge.

Is Wrapped Luna On Coinbase?

Yes, Coinbase allows its users to buy and sell Wrapped Luna tokens on the platform. However, it does not support the original LUNA coin.

Users who wish to acquire LUNA can thus buy Wrapped Luna, transfer the tokens to an external wallet such as MetaMask then use Terra Bridge to convert their tokens to LUNA.

Final thoughts

Terra Luna is one of the most innovative and interesting cryptocurrency projects but it is not compatible with Ethereum applications.

That’s why we have Wrapped Luna. As we have discussed in this article, Terra Luna and Wrapped Luna are quite different but they can be used together to take advantage of both worlds.