Over the past few months, I’ve been researching cryptocurrency projects that live in and out of the Ethereum ecosystem. A few examples of projects like this include CREAM Finance, THORChain, and Mirror.
Given that my current role is within the United Nations, I have to be cognizant about how different blockchain projects behave for the average consumer. The behaviours I am most interested in are cost, speed, and usability.
A ton of innovation has happened in the Ethereum ecosystem, however till a few technical challenges are resolved / implemented (EIP-1559, ETH2.0, etc.), it is mostly unusable to the average person. The cost to interact with the platform is expensive and there are a ton of user-experience challenges.
I ran into Terra Money a few weeks back and I noticed that right at the top of their white paper they mentioned “Stability and Adoption”. Once I read that, I knew I had to dive in further.
After skimming through the white paper, here are my key highlights from the project.
The project is created with Cosmos SDK
Terra has two major tokens: UST and Luna
The Terra Money ecosystem is programmable
Let’s dive into the key highlights of Terra Money.
Tendermint / Cosmos SDK
Having this project run on Cosmos SDK is important because it means that Terra Money achieves consensus on its blockchain through Tendermint BFT. Tendermint BFT means that the network validators of its blockchain are a part of a Proof of Stake system, implying a more efficient network (when compared to the Ethereum blockchain).
A few other things that make the Cosmos SDK a powerful proponent of Terra Money include a built in governance mechanism, an ability to use native authentication and banking modules, and its interoperability with other blockchain networks.
UST and Luna
Terra Money has two main tokens as a part of its ecosystem: UST and Luna. UST is also known as the TerraUSD coin. Luna is the native coin for the Terra Money blockchain.
Terra’s Luna token is used to stabilize the Terra Money ecosystem. By destroying / burning Luna tokens, the UST stable coin and the incentives in the network are stabilized. The governance of the Terra Money blockchain is also conducted by Luna token holders. They can vote on various proposals to upgrade / change the protocol.
Terra’s UST token is a stable coin built on the Terra Money blockchain. The price of UST is determined by supply and demand for the asset and can fluctuate accordingly. The creation of UST is enabled by destroying (or burning) the Luna token.
When UST rises above $1 USD, Luna holders can sell their token for UST. Luna can also be exchanged for the equivalent dollar amount of UST at any given point. When new UST coins are minted, the market cap reduces until UST reaches $1 USD again. If the UST price goes up (due to supply and demand) then Luna holders can mint UST for cheap ($1) as opposed to market rate.
As the UST ecosystem continues to grow, both the demand for both Luna and UST will continue to rise based on how the ecosystem is currently designed.
Since Terra Money is built on the Cosmos SDK, it means that the ecosystem is enabled by smart contracts. With smart contracts, people can build the same ecosystem that exists on the Ethereum blockchain using CosmWasm. CosmWasm is a smart contract platform that can run on several blockchain platforms, including Terra Money. Over time, we will see synthetics, decentralised finance protocols, and more start appearing in the Terra Money blockchain.
Projects Built on Terra Money
There are two major projects currently running / using the Terra Money blockchain that I wanted to highlight, Anchor, and Mirror.
Anchor Protocol is a project that focuses on helping people save. Anyone can deposit money into the project and earn interest on the money they put in. Anchor Protocol looks to provide yields through various proof of stake blockchains (including Terra Money).
Mirror Protocol focuses on reflecting real world assets on the blockchain. it creates synthetics (e.g. Apple stock) on the Terra Money blockchain that tracks the real world price of the asset.
Both projects are looking to make finance easier to access to people around the world and I look forward to seeing these projects grow in their respective fields.
Terra Money is looking to expand its efforts into other blockchains like Ethereum and Solana. Mirror Protocol already has its protocol running on both the Terra Money network and the Ethereum network. I expect more and more projects to start showing up on both Terra Money and Ethereum blockchains (e.g. Compound, AAVE, etc.).
I’m excited to see where this project goes. I think with Terra Money’s focus on stability and adoption, this will be a fun project to keep track of for use cases inside and outside of my current job.
Till next time!