Terra maintains stability by algorithmically adjusting the money supply. Luna holders are also granted governance rights over the fiscal stimulus treasury - endowments to dApps that apply to the Terra ecosystem. the more Luna you stake, the higher the expected value of the rewards you claim. A validator's Luna stake represents pro-rata odds of generating Terra blocks i.e. Validators have to stake Luna in order to be granted the right to validate blocks and access a perpetual stream of ledger fees as a reward for their work - and equivalently are exposed to slashing if they are found to misreport ledger state.
The blockchain layer in Terra collapses the multiple layers of payments processors present in modern day e-commerce and P2P payments value chains, and manages to reduce the cost of executing transactions by as much as 80% - ledger fees start a default of 0.1% and are capped at 1%. Terra powers the user facing part of the terra.money platform, while Luna - a fixed supply variable price token - powers the infrastructure. Terra(X) is the stablecoin component - where (X) is any fiat equivalence supported on Terra (e.g X = KRW, USD etc), and Luna is the protocol token. Terra is essentially composed of 2 tokens that live in parallel Terra and Luna. However, where its predecessors have thus far failed, Terra is getting promising traction. This is not the first time we see an asset of this type hit the market - Basis and The Reserve are the two most prominent ones that jump to mind. Terra is a stablecoin project out of Korea that deploys a seigniorage shares model in order to algorithmically ensure stability in the system. Terra.money seigniorage shares done right
At current prices, pre-sale investors are likely at break-even, having already booked (some) profit.Ĭonservative estimates from a DCF model, show that Luna, at current price levels, is undervalued by between 38% and 67%. Luna lost ~75% of its value since listing in Q3 2019. The interplay of the two loops optimizes for long-term oriented actors to populate the consensus layer, a net positive.īoth the decision to start with Korea, and the go-to-market strategy Terra is deploying, are moats in the making, if executed well. There is a hidden viral loop in the Token economics, that incentivizes merchants to also be stakers and enlist as many other merchants as possible to drive their unit costs down. There is a hidden negative multiplier effect in the Terra system, that will dampen the price of Luna - until a network effect is reached.
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