Blockchain technology is constantly evolving. They are making even transactions such as the Currency Converter Euro to Dollar more secure. You can get more profitable Exchange Rates Euro to USD thanks to blockchain. And this is just one of hundreds of examples of using new technologies. Terra has been one of the most promising blockchains.
Now many are wondering what will happen to Terra, whose ecosystem includes the TerraUSD (UST) stablecoin and the LUNA token. The reason for the discussion was the loss of the stablecoin’s peg to the U.S. dollar, which led to the destruction of its parent platform. Let’s find out if Terra has a chance at revival.
What happened
In early May 2022, the TerraUSD (UST) crypto projects algorithmic stackcoin Terra lost its peg to the U.S. dollar. Everyone expected its price to be as stable as the USDT token price. The platform’s native token, LUNA, was responsible for stabilizing the “stable coin” rate. Because of the loss of UST parity with the U.S. dollar, the coins began to plummet. After that, some users even questioned Tether’s crypto price prediction.
The developers tried to restore the UST’s peg to the US dollar through additional funding for the stablecoin. The platform team also tried to resuscitate the project through the burning of LUNA. Unfortunately for Terra representatives, their actions did not yield the expected result.
The destruction of Terra’s ecosystem caused the platform’s cryptocurrency investors to lose money. Amid the problems the project faced, its representatives were sued. Also, the parent company Terra was accused of tax evasion. The situation surrounding the company took control of South Korean authorities.
Employees began to leave the company. At the same time, many members of the crypto community, despite all the problems, still believe in the future of the project.
Latest Market News – Terra relaunch: any chance for success?
The collapse of Terra was the main event of Latest Market News, affecting both the Stablecoin segment and the rest of the cryptosphere. Nevertheless, Terra founder Do Kwon has already announced the relaunch of the project and the LUNA token. But will this initiative be a success? Let’s look at the new Terraform Labs initiative, its strengths and weaknesses, and the opportunities and risks of the project after its reincarnation.
What is Terra 2.0?
Terra’s founders and developers have only partially acknowledged the failure of their approach to integrating the UST algorithmic stackablecoin and the LUNA native token, which was supposed to help maintain UST parity with the US dollar.
When the inability to maintain a 1:1 balance with the U.S. dollar became apparent to investors, the multifold increase in LUNA supply only made things worse, as the market value of the native token plummeted to near zero. Do Kwon and his team proposed an alternative approach to solving the problem through the creation of a fork based on the Terra network and a new approach to distributing tokens to holders.
According to the proposal to revive the project, the old version will be called Terra Classic and its tokens will be called LUNA Classic (LUNC). Accordingly, the new network will use the traditional name Terra with the native token LUNA.
The project assumes that algorithmic stablecoins will no longer be used, so as not to create risks to the stability of the system. Token inflation will be strictly regulated, and the staking target will be 7% per annum.
The initial allocation of LUNA will be between earlier Luna Classic and UST holders (who were most affected by the Terra collapse), as well as Luna Classic app developers and LUNC stackers. The goal of harmonizing the interests of project developers and the Terra ecosystem over the long term was also declared.
Terra ecosystem members also voted to burn 1.3 billion USTs (more than 10% of the total supply) issued because of a failed attempt to maintain liquidity, according to ICB Fund. Do Kwon argues that such a plan would allow Terra to grow successfully in the future and regain its leadership position in the market.
Conclusions and recommendations
Experts agree that Terra 2.0 is not sustainable or innovative enough to seriously claim to regain its position among the leading cryptocurrencies. This is also confirmed by Latest Stocks News. These tokens should not be recommended for inclusion in a cryptocurrency portfolio for investment.
The main reason is the disproportionately high risks, not supported by appropriate growth opportunities in the long term. The only option for those traders who still strongly prefer to use Terra in their trading is to rely on technical analysis and intraday trading.
According to experts, Terra developers have lost a key element that would have allowed them to restore the project – the trust of users. However, the TerraUSD incident should be a lesson for developers of other stablecoins.