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Terra is part of the decentralized finance (DeFi) industry, which seeks to replace traditional financial services with a decentralized alternative on the blockchain. DeFi has attracted crypto investors as a more efficient and less expensive option to send money globally. The original version of Terra collapsed, bringing down the rest of the crypto market with it earlier in 2022. In its place, a new protocol with many improvements was erected. The new coin, LUNA, replaced the old Terra Luna token (now called Terra Classic (LUNC)) on the new network.
Ready to be part of the DeFi industry? Learn how you can buy Terra (LUNA) today.
What is Terra?
Terra is a decentralized global payment system made specifically for transferring stablecoins. Stablecoins are pegged to other currencies like USD, so payments on Terra don’t fluctuate with the cryptocurrency markets. This limits the risk of buying volatile cryptocurrency while still providing all the benefits of a decentralized payment system.
Terra and LUNA are like two sides of the same ecosystem. Terra is a family of stablecoins that are pegged to the value of various fiat currencies, such as USD, EUR, and KRW. These stablecoins are designed to be fast, cheap, and secure, making them ideal for everyday transactions. Luna, on the other hand, is the native token of the Terra ecosystem.
Unlike most DeFi protocols that operate on Ethereum’s network, Terra operates on the Cosmos blockchain. Cosmos has many operational benefits over Ethereum’s network, such as quicker transactions and less expensive transaction fees.
However, there are downsides to Terra on the Cosmos network. Ethereum has the most applications built on its platform, and only other applications built on Ethereum can directly interact with these programs. Because Terra isn’t built on Ethereum yet, the platform has less liquidity and a smaller user base than many of its competitors.
Terra developed what looked like a brilliant system of cross-chain stablecoins (namely UST) that lived on its Cosmos chain, Ethereum and Solana at the same time. This proved to be disastrous after UST lost its peg to the USD, crashing the entire system and bringing the value of LUNA to almost $0. The new LUNA chain completely eliminated UST so a similar disaster shouldn't happen again.
Brief History of Terra
Terra was made with a focus on price stability and user experience. Daniel Shin and Do Kwon founded Terra in January 2018 when the cryptocurrency market bubble popped.
Institutional investors that purchased LUNA during its initial coin offering include Binance, OKEx and Huobi. Terra raised $32 million from its ICO in 2018, minting 385,245,974 LUNA, and the total market has grown to over $2.8 billion at the time of writing.
However, in early May 2022, the Terra ecosystem faced significant downwards pressure as its native stablecoin (UST) depegged from the U.S. dollar. To learn more about this catastrophic event click here.
Luna: Terra’s Native Cryptocurrency
Luna is the native cryptocurrency to Terra’s platform. Luna is used to provide liquidity to the platform, as decentralized finance programs need its users to provide liquidity in its smart contracts. Smart contracts are code on the blockchain that is capable of performing financial functions with cryptocurrencies.
Terra offers rewards to incentivize users to stake Luna on its platform. Users can earn interest from transaction fees and arbitrage on Terra’s platform. Staking is necessary not only for liquidity, but to adjust the prices of stablecoins through the smart contract’s rebalancing algorithms.
Luna has a maximum supply of 1 billion tokens, but technically more than 1 billion tokens can be minted. If more than 1 billion tokens are available in the ecosystem, the program will burn extra supply in its treasury.
How to Buy Terra (LUNA)
- Open an online account.
To get started investing you need to open an account with a crypto brokerage that supports Luna. The 2 most prominent cryptocurrency exchanges that support Terra in the U.S are Voyager and Gemini.
Like an account with a stock brokerage, you’ll have to provide personal identification information for tax purposes. To make an account with these exchanges, you’ll need to provide your name, Social Security number, address, email and birthdate.
- Buy or download a crypto wallet.
In order to hold your cryptocurrency securely you need to store your assets on a cryptocurrency wallet. Storing your cryptocurrencies on exchanges makes your crypto at risk of being hacked –– many exchanges that claim to be secure have been breached in the past.
Cryptocurrency wallets can be software wallets or hardware wallets. Software wallets are mobile apps or computer programs that store cryptocurrencies, and hardware wallets are physical devices that store your cryptocurrency offline. Hardware wallets are the most secure way to store your crypto, as it’s impossible to access your funds without the physical device.
If you plan on trading your crypto regularly, you’ll need to keep your funds on the exchange to do so. Binance is the most secure exchange to use for trading because it has a reserve account to insure your assets against security breaches.
- Make your purchase.
Once you’ve chosen a crypto wallet to store your funds on, you’re ready to make your purchase. You can place your buy order for Luna as either a limit or market order.
Market orders will purchase Luna at the current market price, while limit orders will execute at a specified price you set. If the market price of Luna never reaches the price specified in your limit order, it won’t be filled.
Best Crypto Exchanges For LUNA
Not all cryptocurrency exchanges are created equal. Some platforms offer dozens of cryptocurrencies to invest in, while others only offer a select few altcoins and bitcoin. Also, it's important to consider the security and reputability of the crypto exchange you choose to use. Many more exchanges offered the original LUNA token (now called Terra Classic) but luckily there are a few great trading platforms that offer the new LUNA. The most reputable exchanges that support the trading of LUNA 2.0 are Pionex, Binance (for non-U.S. investors) and Crypto.com.
Unlike some platforms, these exchanges let users send and receive cryptocurrency from their exchange wallets. This way, you're able to stake and earn interest on cryptocurrencies through decentralized applications (dApps).
Best Crypto Wallets
Here are the best software and hardware wallets for Terra (LUNA).
Best Hardware Wallet: Ledger Nano S
There aren’t many choices when it comes to hardware wallets that support Luna. Most multi-coin wallets support major cryptos like Ethereum and Bitcoin, but few support smaller cryptocurrencies like Luna.
The Ledger Nano S is your best bet for storing your Luna in a hardware wallet. Out of the package, the Ledger Nano S doesn’t support Luna. You need to use the Ledger Live application to download Terra Station on your hardware wallet. Once the program is installed, you can send Luna to your Ledger wallet.
The Ledger Nano S comes in at an affordable $51 on Amazon. Ledger also offers a premium version called the Ledger Nano X for just over $100, but it’s currently out of stock on Amazon. No matter what Ledger wallet you choose, they all offer great security features to keep your crypto safe.
Trade or Sell Your Cryptocurrency
Soon after your buy order for Luna is fulfilled, you should see your Luna coins credited on your brokerage account. It’s not recommended you keep your Luna, or any other crypto, on an exchange unless you are actively trading.
In most cases, you can’t trade crypto you store on your wallet. In order to sell your Luna you’ll need to transfer it back to a supported crypto exchange. Alternatively, you can use ZenGo to trade your digital assets directly from your cryptocurrency wallet.
Current Crypto Prices
It’s a good idea to watch the cryptocurrency markets to get an idea of how the prices are moving. Cryptocurrencies are very volatile assets and can move up or down 20% in a single day.
With Bitcoin in a bear market, many altcoins are plummeting. It is important to keep a close eye on the market to identify if LUNA or any other altcoin appears severely oversold.
Is Terra a Good Investment?
Terra offers a unique approach to decentralized payment solutions. There’s a clear benefit for users to be able to transact stablecoins globally in a quick and secure way, and Terra has many competitors with more daily users on their platforms. However, it is important to note that the Terra ecosystem is extremely risky and should be taken with extreme caution.
Overall Terra may be a good long-term investment for you if you believe that the Cosmos blockchain is a better platform for DeFi than Ethereum. Cosmos has more efficient transactions and is far more scalable than Ethereum, but the platform suffers from a small user base.
Terra is working hard to integrate their tokens on the Ethereum network and regain trust from members of their ecosystem following the UST depeg. If trust is regained, Terra may be able to expand its user base significantly over the next few years.
Frequently Asked Questions
Why did Terra Luna crash?
Luna is an algorithmic stablecoin, so it requires risk assets to maintain its $1 peg. However, a bearish market led to a huge sell-off causing the currency to be de-pegged.
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