The crypto world noticed many attractive projects come to life. For instance, some want to supersede financial enterprises, while others dug more in-depth into fine arts and digital collectibles. Therefore, there is no preventing this trend of decentralization, which might certainly drive it to prove itself in the mainstream. Cryptocurrencies have long been blamed for their volatile prices. No one would like to watch his holdings decline in value overnight. That’s how stablecoins were born, and Terra Luna was looking to bridge the hole between the highly volatile markets, and the mainstream customer. Let’s take a look at it in more detail.
The Terraform Labs stablecoin UST and its concurrent LUNA token tumbled in May, giving shockwaves to the crypto markets that they have yet to heal from. But in an endeavor to repair the system, Terra relaunched the new LUNA token called LUNA 2.0 at the end of May. Let’s take a look at it in more detail.
What is Terra (Luna)?
The Terra project was established in 2018 by ex-Apple and Microsoft software engineers: Do Kwon, who was an earlier founder and CEO of decentralized wireless mesh networking company Anyfi, and Daniel Shin, who co-founded e-commerce company Ticket Monster.
What Is Terra Luna Classic (LUNC)?
What exactly happened?
Terra was one of the top digital asset ecosystems, tumbling in May 2022, perhaps the most significant token thunderclap in crypto history. Within a week, the price of UST, the world’s biggest stablecoin, and its token LUNA, which was considered to hold UST’s price, plunged to almost nothing.
UST and LUNA both come under the top ten coins before their decline. During the disruption, the Terra blockchain was compelled to halt twice. During that time, a program to maintain LUNA active via a bifurcation appeared. LUNA 2.0 and LUNA Classic arose from the latter.
Many people who encountered considerable losses due to the LUNA tragedy have alienated themselves from the initiative. However, as LUNA arises from the ashes, some seek rescue, and some desire to make a profit.
LUNA 2.0 vs. LUNA Classic: What’s the Difference?
The Terra fork was created to support the network. The fork assured that the actual LUNA, now called LUNA Classic or LUNC, would persist to live. Yet, due to extreme minting to hold the UST’s peg, the LUNA’s pool was boosted to a circulating distribution of approximately 6.5 trillion coins. It also directed the expansion of LUNA 2.0, which has a circulating supply of solely 210 million LUNA.
There is no ‘mint and burn’ instrument in business for LUNA 2.0. For now, as a piece of an endeavor to evade future episodes, a proposal called ‘Prop 29’ was presented to limit the working of the Anchor protocol. Due to its restricted circulating supply and heightened trading volumes, LUNA 2.0 seems to be more dominant on paper.
In other words, LUNA 2.0 does not include a stablecoin backed by a mint and burn instrument. Meanwhile, a proposal called Prop 29 was passed to limit the Anchor protocol’s functionality as one of the efforts aimed at preventing future attacks.
The fundamental difference between Luna and Luna 2.0 is that the latter will not depend on any stablecoin affinity. The actual Luna crypto sustained value via its association with TerraLabs’ stablecoin, TerraUSD (UST). This association applied the burning or minting of one of the coins when the other coin’s pool or request fluctuated slightly too much.
Luna 2.0 was released on May 28 for the new Terra chain. It had a takeoff time of 6 AM UTC, when the first block on the new mainnet, called Phoenix-1, was created.
The Objective of Luna 2.0
When Luna and TerraUSD collided, people who had invested in either of the two coins started pitching directions at Do Kwon and Terraform Labs’ developers. A mass burning was a specifically favored advice. Yet, Kwon said on Twitter that this would not help investors.
Do Kwon also offered a hard fork of the Terra blockchain, that received varied reactions from the community. But regardless of the objection, Kwon moved ahead with this determination, and Luna 2.0 was launched on May 28, 2022. An airdrop also escorted the launch to promote new investments.
The new Luna blockchain was designed as a method for Terra and its investors to recover from the huge losses incurred via the LUNA/UST drop. With so many users encountering financial impairments from the crash, TerraLabs wanted to repay investors in some form and launched a new blockchain.
Those who kept Luna tokens before the price drop obtained 35% of the LUNA supply, with UST holders obtaining 10%. An extra 25% was provided to users who remained to maintain LUNA or UST after the drop. The share each investor obtains relies on how much of either token they had earlier or still keep now.
LUNA 2.0 price prediction: Should You Invest?
The LUNA 2.0 token was tossed on 28 May and instantly dropped in price by almost 74%. It then dropped by another 60%, but it has stabilized in the past week as the market tries to assess fair value amid the dispute encircling the price drop.
Even after the burn, in terms of price, there isn’t likely to be much of a transformation. There’s no method of comprehending what will happen next with Terraform Labs and its coins after so much has already transpired in the first half of 2022.