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ARTICLE SOURCE 👉https://coinmarketcap.com/alexandria/article/what-is-luna-features-tokenomics-and-price-prediction

What Is Terra (LUNA)? Features, Tokenomics and Price Prediction

Published on: August 30, 2021
Written by: Hassan Shafiq

Terra (LUNA) powers the Terra network, and acts as a governance and staking token that supports Terra's stablecoins and payment processing systems.

The Recent 1235% Spike In Terra (LUNA) Price
The bullish trend of LUNA started from $6 and in the last month alone it has seen a 1235% ROI for LUNA holders. On 1st August 2021, LUNA was priced less than $12, however, this month proved to be an exciting one for the coin as a bullish pattern engulfed it and the price soared close to $35!

On August 17th alone, LUNA went up by 37%. The biggest catalyst being cited behind this huge spike is the acceptance of Wrapped Luna & TerraUSD on Coinbase Pro (one of the top centralized crypto exchanges) on August 12.

Another probable factor behind the latest price surge of Terra (LUNA) is the news about the upgrade called Columbus-5. This upgrade will provide additional incentives for stakers in the Terra ecosystem and allow more applications to be created on the Terra network. In summary, new upgrades to the Terra network may continue to spike the price of Terra (LUNA), much like the case with Ethereum or any other major blockchain and its tokens/coins.

How Does Terra (LUNA) Work?
The blockchain – Terra is a completely digital, decentralized financial corporation – kind of a central bank in its own domain. Customers can accrue interest on their digital assets, spend it using the company's payment system, or even trade-in synthesized stocks. Terra (LUNA) – the company's token, underlies much of what it accomplishes.

The Terra platform provides a variety of stablecoin alternatives with an instantaneous settlement. Terra does this by employing a price-stability algorithm that proactively changes an asset's monetary supply to maintain its value. This mechanism helps Terra in offering its customers cheaper fees, increased stability, smoother cross-border exchanges and more responsive financial assets.

The Popular Debate Of Stablecoins Backed By Traditional Money
Tether (USDT), the most prominent stablecoin by market capitalization, ran out of reserves at one point in 2019. This is important because, at that particular point in time, there would not have been enough money if everyone sought to cash in their USDT.

Tether is an 'off-chain' asset-backed stablecoin, meaning it is supported by non-crypto currency bank deposits.

Terra's currencies, on the other hand, function uniquely. Algorithmic stablecoins are backed by the LUNA token. To keep the price steady, algorithmic stablecoins employ a central bank or a pool of tokens managed by smart contracts. If the price of UST climbs above $1, for instance, the algorithm will use LUNA to generate more UST and lower the price. If the price dropped for some reason, it would switch from UST to LUNA to raise it again.

LUNA is essential for Terra's stablecoins to remain stable. Token holders can stake the coin to be compensated for absorbing volatility, for which the Terra payment network pays token holders a portion of transaction fees.

The Vision Behind Terra
Terraform Labs, the South Korean firm founded by Daniel Shin and Do Kwon in 2018, intends to use Terra's blockchain and related cryptocurrencies to create a better (digital) financial system free of big banks and fintech app developers. So far, the Chai payment app, which is built on Terra's blockchain, has been its major source of growth in Korea, where consumers have used it to buy products in businesses, like coffee and other consumer items. The company's related Mirror trading app, according to Kwon, is growing in China and Thailand.

Apart from cryptocurrencies, Terraform Labs is working on a variety of other initiatives, including the Anchor Protocol – a high-yield savings account for Terra (LUNA) digital currency holders. Users can use the Mirror Protocol built on Terra blockchain to generate synthetic financial assets that resemble more traditional ones, such as "tokenized" corporate stock assets. These synthetic assets are meant to allow small businesses to acquire shares and receive access to the upside of equities, which otherwise they wouldn't have been able to access, according to the co-founder of Terra-form labs, Kwon.