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Introduction to Terra Blockchain

Introduction to Terra Blockchain
Table of Contents
Terra

Founded in January 2018, Terra is an open source blockchain payment platform for algorithmic stablecoins, which are crypto that track the price of currencies or other assets. Terra blockchain enables users to spend, save, trade or exchange Terra stablecoins.

Terra protocol creates stablecoins that can track the price of any fiat currency, such as USD. It consists of two main cryptocurrency tokens – Terra and Luna.

Stablecoins are the main feature of the Terra protocol, which crypto assets can track the price of an underlying currency. Terra stablecoins can be used like fiat currency with blockchain’s added benefit including an unchangeable public ledger, instant transactions, faster settlement times and lower fees. The protocol uses the basic market forces of demand and supply to maintain the price of Terra. When Demand for Terra is high and supply is limited, the price of Terra will increase, and vice versa. This can ensure the demand and supply of Terra is always balanced.

Luna is used for governance and mining. It allows holders to pay network fees, staking, etc. Users can stake Luna to Terra blockchain miners which record and verify transactions on the blockchain and receive rewards from transaction fees as compensation.

Features of Luna #

Luna has the following features:

  • Staking rewards to Luna holders: Luna holders can stake their tokens in the Terra ecosystem. They can pledge their tokens to the Terra network when they stake Luna, after which their tokens are used to validate transactions. They also have the option of unstaking their tokens from the ecosystem. However, it may take up to 21 days for this process to complete. Similar to other staking mechanisms in the crypto world, the rewards that Luna holders get from staking depend on the size of the stake, the number of rewards is directly proportional to the size of the transaction volume.
  • Use of stablecoins: By the use of a configurable architecture, Terra can deliver self-stabilizing stablecoins and other unique characteristics to the market. Currently, Terra has a wide variety of stablecoins including TerraUSD (UST), TerrKRT (KRT), etc. All these are tied with a currency behind them such as USD, South Korean won, etc.
  • Terra Gas: Like Ethereum, Terra incorporated the utilization of gas to execute smart contracts. This method provides miners with an additional incentive to carry out these operations. Validators can establish minimum gas prices and invalidate transactions with implied gas costs. The fees are distributed to the collaborating validators pro-rata to stake at the conclusion of each block.

Benefits of Terra #

Terra has the following benefits:

  • Interconnection between several chains: Terra has collaboration and interconnection of its ecosystem. It connects several chains, allowing the network to function on many chains like Ethereum and Solana.
  • Easy management: Terra uses a single blockchain layer to decrease or eliminate the requirement for credit card networks, banks and payment gateways.

Conclusion #

There will be plenty of opportunities for Terra to take advantages of its cross-chain compatibility with other Cosmos SDK blockchains in the future, there is still room for Terra to expand and improve its user base.

Updated on December 19, 2021
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