What is Terra?
- Proof of stake blockchain focusing on a mass payment processing system and the creation of stablecoin
- Terra caps fees at 1% for payment processing, and is usually lower than 1%
- The advantage of Terra is their stablecoin algorithm
- For a merchant, using BTC and other alt coins has a price volatility risk; price can quickly go up and down depending on the markets
- Stablecoins are pegged to fiat currencies: Learn more about StableCoins here
- For Terra, Luna is used to maintain the stable value of Terra
- Used to burn or to create more UST to peg UST at $1 USD
- Example: If Terra > $1, then they make more Terra by incentivizing holders of Luna to trade in Luna for Terra for a small profit. In the opposite scenario, Terran incentives holder for Terra to trade their Terra for Luna for a small profit.
- Simplifying transitions by using stable coins
- Mirror protocol: Used creation of mAssets; token to represent or mirror another asset (e.g. mETH to represent ETH) but it can be any crypto or real assets
- Anchor protocols: basically, a saving accounts that currently earns APY of 19%. You deposit UST and you earn yield that is compounded daily.