Terra Ecosystem is a vast network of blockchain technology that has seen a steady stream of advancement in the market. TerraUSD (UST) and Luna (LUNA) are two of the basic coins of the Terra Ecosystem that have shown massive growth in the business recently. The LUNA has taken the business 138-folds whereas UST experienced a peak from $180 Million to almost $15 Billion in a span of a year only.
LUNA is one of the most stable coins, while UST is notably the most famous coin of Terra Ecosystem, whose price range is almost near to that of a US dollar. Since the LUNA and UST have experienced tremendous growth recently, the future of UST and LUNA corresponds to their stability in the worst market conditions where the broader digital asset market has been facing a constant downfall since the end of 2021.
Function Principle of Terra Blockchain Technology
The Terra Ecosystem is a network of blockchain technology based on the Cosmos SDK, which helps other systems or projects of blockchains to communicate with each other. It also enables the exchange of data and tokens among different blockchain ecosystems, including Harmony, Osmosis, Binance Smart Chain, and even ETH. The Terra blockchains intend to enhance the potential of crypto in the crypto financial ecosystem.
The Terra ecosystem has established a dual token system between two of its native coins: UST and LUNA. This relationship is most likely the one between Moon and Earth, as they also perform their duties accordingly for the sake of stability in the universe. UST tokens were minted by burning LUNA, and they can be traded for LUNA; this is known as Seigniorage. That is how the Terra ecosystem creates stablecoins and aims to maintain their stability in the fluctuating conditions of the digital market.
The focus of the Terra ecosystem is on the simpler, faster, and cheaper mass payment processing and creation of a functional, stable coin that does not fluctuate in the wild swings of the digital asset market. People can make payments with Terra along with so many other things, including lending, insurance, borrowing, investing, and charitable causes, with the cheapest computational fee of only 1%.
How do LUNA and UST Work Together?
LUNA is the native and one of the most important tokens of the Terra ecosystem and is narrated as a staking or protocol token that helps maintain the stability of Terra stablecoins so that they do not have to confront the volatility of the digital market.
On the other hand, UST has evolved and emerged as the fourth largest algorithmically stablecoin of the broader digital asset market and has taken the growth to the peak of about $15 Billion in market capitalization.
As mentioned earlier, the Terra blockchain technology has established a dual token system between the LUNA and UST, so LUNA works in collaboration with UST to achieve the goal of stability.
In case if the UST value surpasses the value of 1 USD, the corresponding amount of LUNA will come to the ground to attain stability and get burned, which in turn mints more number of UST coins. In this way, LUNA becomes more valuable while the value of UST decreases. On the contrary, if the price range of UST drops below the value of 1 USD, more UST will be swapped for LUNA and consequently making it more beneficial and decreasing the value of LUNA.
What Are the Threats Surrounding LUNA and UST Coins?
The algorithmic stablecoins are relatively unregulated around the world. They have been considered inherently fragile, remaining in the constant state of perpetual vulnerability and not capable enough to sustain the stress and shocks of wild swings of the digital market. As the LUNA and UST are stablecoins so the risks of downfall are associated with them as well, but since their launch, they have shown a great deal of stability and experienced tremendous growth.
The Terra ecosystem is a famous framework of blockchain technology built on the Cosmos SDK that is responsible for the digital business in the crypto financial market. With the purpose of creating stablecoins, the Terra Ecosystem has implemented a linked dual token system between two of its native coins, which are LUNA and UST. They work together, generate huge revenue for investors, and have recently shown remarkable growth in the broader digital asset market.