Terra Classic (LUNC)

From CryptoWiki

FOR LUNA 2.0 CHECK THE DIFFERENT PAGE.

This page is about Luna before the depeg event of UST

Terra Classic
TypeStablecoins & Smart Contracts
Consensus mechanismPoS Tendermint
Total supplyCMC: 995,859,074 LUNA

Binance Research (19-8-2020): 995,039,007

No Cap. Burn & Mint model
Websitehttps://terra.money/

"The Terra Protocol’s mission is to free people from the hidden fees that are embedded in everyday international payments. They aim to strip away inefficiencies by using blockchain technology to offer stability and adoption by e-commerce platforms. This protocol is the creator of the Luna Token, Terra Core, and CHAI.

The Terra Protocol runs on a Tendermint Delegated Proof of Stake algorithm and Cosmos SDK. It is aimed at becoming a new worldwide financial infrastructure on which different DApps can be created. Terra has designed a stablecoin that can be used as a payment method on its blockchain payment solution. If you want to become a validator, you must demonstrate investment in the Terra protocol by staking their Luna tokens."

Basics

  • Based in: Started out in South-Korea, but moved its TFL to Singapore, a couple of days before the crash of the 9th of May 2022.
  • Started in: 1-2018
  • Testnet release:
  • Mainnet release: 24-4-2019

"Terra describes itself as a price-stable cryptocurrency aimed at mass adoption. As its scale grows, the team aims to have Terra evolve into a new financial infrastructure for the next generation of decentralized apps."

"Terra is a protocol to create decentralized price-stable cryptocurrencies (stablecoins). Terra is hosting a set of stablecoins and processing transactions of partners integrating with the network."

History

"When the TerraUSD algorithmic stablecoin (UST) lost its peg, millions of dollars were wiped out in a matter of days. The coin, which used to carry a redeemable-for-a-dollar guarantee, has been trading for just a nickel. And LUNA, its governance token, which last month had a market cap of more than $30 billion, has seen that metric slip to $680 million. The company behind it all got its start in 2018.

Business partners Do Kwon and Daniel Shin founded Terraform Labs in January, and that April registered it as a private limited share company in Singapore. By August, Terraform had completed a $32 million raise that included Translink Capital, Polychain Capital, FBG Capital, Hashed, 1kx, Kenetic Capital, and Arrington XRP. Four of the largest crypto exchanges—Binance, OKEx, Huobi Capital, and Dunamu—invested in Terra’s Layer-0 blockchain as well. From the onset, Terra wanted to become a payments giant that could rival the likes of Alipay and PayPal. Shin, the founder of Korean e-commerce giant TMON, would later help bring more than 20 other companies to the table to form the Terra Alliance and adopt its payment system.

At the start of 2019, Terra raised $62 million with an initial coin offering (ICO) for its LUNA governance token, at $0.80 per LUNA. The team said it would be part of a “dual-token system, which is composed of Terra—the stablecoin—and Luna, the collateral token.”

The slide deck that accompanied the ICO also promised that its “Terra Stability Reserve” guaranteed solvency, “protecting it from the speculative and regulatory risks that other coins are exposed to.”

Not long after that—exactly one year after Terraform Labs was registered in Singapore—the company launched Mainnet Columbus on April 24, 2019. Making good on the second part of its dual-token system, Terra announced the launch of its stablecoin in September 2020. But less than a year later, it was facing strong macroeconomic headwinds. China was in the middle of cracking down on Bitcoin miners, and UST lost its dollar peg for the first time on May 22, 2021. Terra’s algorithmic stablecoin lost its dollar peg for the first time, and traded for $0.95 for two days, according to CoinMarketCap. Later that year, the final pieces that would make Terra’s downfall so calamitous moved into place. In October 2021, Terra joined both Wormhole and the Cosmos IBC, bridge chains that would make it possible for users to move their funds onto the blockchain from others.

The day after the Wormhole announcement was posted on Terra’s blog, the project’s total value locked (TVL) edged above $5 billion for the first time, according to DeFi Llama. By the time Terra joined IBC, there was $2 billion worth of UST in circulation and its ecosystem had more than $9 billion worth of assets. With all the pieces in place, Kwon began accumulating Bitcoin in a reserve wallet, saying he wanted to eventually have $10 billion worth of Bitcoin backing UST.

“It's not 10B today - as UST money supply grows a portion of the seigniorage will go to build BTC reserves bridged to the Terra chain,” he said in a tweet in March. “We have 3B funds ready to seed this reserve, but technical infrastructure (bridges etc) is still not ready yet.”

Right before Terra’s UST lost its dollar peg on May 9, the Luna Foundation Guard Bitcoin reserve had grown to 42.5 BTC, at the time worth $1.4 billion. But when the Bitcoin price started to tank, UST lost its peg and would eventually drag LUNA, the TerraForm Labs team, and thousands of investors down with it."

"Stablecoin initiated by one of South Korea's e-commerce giants, TMON. Terra is one of many payment providers available to e-commerce users in South Korea, primarily through its payment app, Chai."

"Terra was founded in January 2018 by Daniel Shin and Do Kwon. Kwon took on the position of CEO of Terraform Labs, the company behind Terra.

Prior to developing Terra, Shin co-founded and headed Ticket Monster, otherwise known as TMON — a major South Korean e-commerce platform. He later co-founded Fast Track Asia, a startup incubator working with entrepreneurs to build fully functional companies.

Kwon previously founded and served as CEO of Anyfi, a startup providing decentralized wireless mesh networking solutions. He has also worked as a software engineer for Microsoft and Apple."

"Terra was created in January 2018 with the singular vision of facilitating the mass adoption of cryptocurrencies by creating digitally native assets that are price-stable against the world's major fiat currencies. Keeping in mind that previous innovations in the technology of money was bootstrapped by large payment networks (Alipay with Taobao, Paypal with eBay, Visa with banks), Terra was born with the support of the Terra Alliance, 15 large e-commerce companies in Asia that collectively process 25 billion USD in annualized transaction volume and 45 million users. The vision of the project is that with the adoption and user engagement of a massive payment network, it will be able to, for the first time, bootstrap a blockchain payment network to the scale it deserves and facilitate far more powerful products and use cases through its infrastructure.

During conversations between co-founders, Daniel Shin and Do Kwon, the concept of Terra began as a solution towards immediate and massive usage of the cryptocurrency and blockchain infrastructure being built around them. To them, price stability and adoption were important in preparing the first steps towards massive adoption of cryptocurrency and blockchain infrastructure. Daniel Shin, with his extensive experience in building one of the biggest e-commerce platforms in Asia, laid out the existing problems we face in payment networks that cannot be solved through just incremental improvements. Do Kwon, previously a founder of a wireless mesh network startup building decentralized application, explained how Terra can turn those problems into an opportunity to build money from the ground up. One part of Terra's value contributions, payments, in essence replaces the complicated payments value chain, including credit card networks, banks, and payment gateways with a single blockchain layer. Through this, it can offer merchants a significantly cheaper transaction fee, saving them money that can be reinvested in something else. Further, in concert with the efficiencies that Terra has provided payment channels for both merchants and consumers, it continues to steadily provide infrastructural improvements and tools for the foundations of laying down a credibly neutral, distributed, and radically transparent ecosystem."

Audits & Exploits

  • From their blog (3-3-2021):

"Terraform Capital, Terra’s strategic investment arm seeded with $10M to fund audits for projects that incorporate UST/LUNA, is unveiled. Leading security teams Quantstamp, Sentnl, Solidified and Cryptonics are onboarded as audit partners for Terra Capital."

Bugs/Exploits

  • The Terra blockchain got halted again on May 13, 2022 after its validators, users who tend its blockchain, pulled the plug. The news came eight hours after the blockchain resumed block production; it was paused for two hours on May 12.
  • One anon brought up the theory of the depeg having been caused by an attack and that the attacker made $800M by doing it (11-5-2022).
  • After the massive de-peg event on the 9th of May 2022, LUNA got printed to push the peg back to 1$. This however did not work, and LUNA got printed immensely. To counter this security risk, validators halted the chain multiple times in the following week. From Bitcoin.com (12-5-2022):

"The team’s Twitter account addressed the public by saying: “The Terra blockchain was officially halted at a block height of 7603700. Terra validators have decided to halt the Terra chain to prevent governance attacks following severe $LUNA inflation and a significantly reduced cost of attack.” Following the patch update, the team explained that the patch release codebase was available and further said: “Delegations will be disabled once block production resumes. The network should go live once 2/3 of the voting power comes online. An update will be provided accordingly.” “The Terra blockchain has resumed block production shortly after. Delegations are disabled now that the chain is live with the new code merge,” the team tweeted."

Governance

"Terra's Governance module inherits from Cosmos' SDK gov module. Within Terra, governance is the process through which participants within the network can effect change on the protocol by submitting petitions known as proposals, arriving at a popular consensus when a threshold amount of support has been reached for it. The proposal structure is versatile and allows for holders of LUNA tokens to voice their opinion on both blockchain parameter updates as well as future development of the Terra protocol.

There are 5 potential proposal types:

  1. Text Proposals are used for creating general-purpose petitions, such as asking the Core team to implement a specific feature. The community can reference a passed Text Proposal to the core developers to indicate that a feature (requiring potentially a soft or hard fork) is in significant demand.
  2. Parameter Change Proposals are a special type of proposal which, once passed, will automatically go in effect by directly altering the network's parameter specified. For each module, you can find the parameters associated with it by browsing to the Parameters section of the module specification.
  3. The Community Pool Spend Proposal defines a special proposal that upon being passed, will disburse the coins specified in Amount to the Recipient account using funds from the Community Pool.
  4. The Tax Rate/Reward Update Proposal defines special proposals which allow the Tax Rate and Reward Weight values to be voted on and changed accordingly, subject to the policy constraints.
  5. Software Upgrade Proposals are for the moment considered unavailable, as they have not yet been implemented. They thus share the same semantics as a simple Text Proposal."

DAO

  • From their blog (19-7-2021):

"Pylon will be primarily used to roll out all Terra-based community grants and DAO membership fees."

Treasury

  • A billion dollars worth of BTC will be set aside by the Luna Foundation Guard (LFG) to act as a backstop for UST and other Terra stablecoins in case they lose their pegs, as first reported by The Block (23-2-2022).

"Will burn $4.5 billion worth of terra (LUNA), its native token, from its community pool. The decision was taken using the on-chain governance system, and according to proposals 133 and 134, the LUNA will be burned and swapped for the native stablecoin of the chain, UST."

"Nobody holds the treasury keys. The community fund is a moduleaccount that can only move funds when governance proposals are passed by Luna stakeholders. The community fund is added to when a swap occurs to burn luna for Terra. It already exists."

  • From Messari (15-12-2020):

"The network emphasizes decentralized allocation of resources from its fiscal policy to support the development, continued growth, and steady income for decentralization applications (dApps) building on Terra. To receive this seigniorage from the Treasury, a dApp needs to register for consideration as an entity that operates on the Terra network. dApps are eligible for funding depending on their economic activity and use of funding. There are regular voting intervals where Luna validators vote to accept or reject new dApp applications for Treasury accounts."

However, the tokens are in custody by the team and not algorithmically added to the fund, which might be the reason why Messari says there is no decentralized treasury.

Token

Launch

  1. "Seed-sale: 16 cents per Luna, sold ~192M tokens. Lockup 10 - 18 months, with 30% early liquidity.
  2. Private-sale: 80 cents per Luna, sold ~18M tokens. Lockup 3 months, with 6 months linear vest thereafter."

Token allocation

  • From Messari (15-12-2020):

Founders & Project 30%

Investors 26%

"Terraform Labs (10%): Used to facilitate the research & development of the Terra Project. can be found in the accounts/terraform-labs directory. Terraform Labs also holds an additional 4.5% of the LUNA supply on behalf of investors who did not clear KYC in time for their token sale, and thus manually claim tokens for Terraform Labs rather than having their tokens programmatically vest from the genesis block.

Employees & Contributor Pool (20%): Used to compensate employees and contributors of the project. Some part of the coins have already been granted, and can be found in the accounts/employees directory. Currently 4.7% of this pool has been granted.

Terra Alliance (20%): The Terra Alliance is key to driving early adoption and usage for Terra. We will be using this pool to set incentives, mainly marketing discount programs (such as coupons for users) and volume incentives for alliance partners. Terraform Labs will be playing custodian for this pool, taking input from the community to best allocate resources from this pool.

Stability Reserves (20%): Bootstrapping stablecoins is no easy feat, with threats to the peg coming from every adversarial angle. Stability reserves will be to manage the network's early stability close to genesis.

Genesis liquidity (4%): 4% of Luna will be made available to the market close to genesis to allow everyday users to use and interact with it.

Investors (26%)"

Utility

"LUNA is the token of the Terra platform and is used in the issuance of stablecoins (TerraSDRs), as a price stability mechanism, as well as for staking and network governance.

In order to stabilize the value of TerraSDRs with their respective pegged currencies, users can redeem LUNA tokens in exchange for TerraSDRs and vice versa."

Token Details

Stablecoins

"The protocol issues Terra currencies pegged to USD, EUR, CNY, JPY, GBP, KRW, and the IMF SDR over time. More currencies will be added to the list by user voting."

KRT

"The peg of KRT to Korean Won has been getting a bit under pressure over the past few months. Notably since around March this year, the variations have increased and KRT is trading more than 80% of the time below the peg. Although these variations are still very small in comparison to other algorithmic stablecoins, they seem to highlight a small outflow of KRT out of the system. Improving on- and off-ramp and exchange infrastructure, as well as lowering market-making barriers will be counteracting measures to observe over the coming months. Volume growth for KRT has remained strong and Terra is on the way to pass 1 trillion KRT (~$836 million) in cumulative volume over the next 6 months."

UST

"TerraUSD is the first decentralized stablecoin that is scalable, yield bearing and interchain."

Coin Distribution

  • Terraform Labs holds about 45% of the supply (15-12-2020) and hold significant numbers of the Terra stablecoins.
  • Hashed has 10% of the voting power (15-12-2020). Staked, Figment, Certus One, Huobipool all have between 2-6%.
  • From Do Kwon's Twitter (23-5-2021): "I hold the majority of the team’s Luna holdings, and I’ve bought 50M Luna in 2020 and also bought more Luna in 2021."

Tech

  • Whitepaper can be found here (4-2019). "It achieves price-stability via an elastic money supply, enabled by stable mining incentives. It also uses seigniorage created by its minting operations as transaction stimulus, thereby facilitating adoption."
  • Code can be viewed here.

Transaction Details

  • Capacity (TPS): From The Generalist (11-2021): "Terra is built using Cosmos' proof of stake mechanism, called Tendermint. This allows for 10,000 transactions per second — a figure Terra is unlikely to hit in the near term. Kwon has previously said Terra processes up to 1,000 transactions per second at the moment."
  • Latency:
  • 5 second block times.

How it works

"Terra's stability mechanism depends on arbitrage activities by users. For instance, when the price of TerraKRW (TerraSDR pegged to the Korean Won) falls to 0.95:1.00 against the Korean Won in secondary markets, users can purchase 100 TerraKRW with 95 KRW on exchanges, and redeem these tokens on the Terra platform for LUNA tokens worth of 100 KRW. If the price of 1 TerraKRW goes above 1 KRW, users can purchase TerraKRW on the Terra platform and sell on exchanges for a profit."

"Terra Core is based on Tendermint, which relies on a set of validators that are responsible for committing new blocks in the blockchain. These validators participate in the consensus protocol by broadcasting votes which contain cryptographic signatures signed by each validator's private key.

Validator candidates can bond their own Luna and have Luna "delegated", or staked, to them by token holders. The Columbus Mainnet will have 100 validators, but over time this will increase to 300 validators according to a predefined schedule. The validators are determined by who has the most stake delegated to them — the top 100 validator candidates with the most stake will become Terra validators.

Validators and their delegators will earn the following fees:

  1. Compute fees: To prevent spamming, validators may set minimum gas fees for transactions to be included in their mempool. At the end of every block, the compute fees are disbursed to the participating validators pro-rata to stake.
  2. Stability fees: To stabilize the value of Luna, the protocol charges a small percentage transaction fee ranging from 0.1% to 1% on every Terra transaction, capped at 1 TerraSDR. This is paid in any Terra currency, and is disbursed pro-rata to stake at the end of every block in TerraSDR.
  3. Seigniorage rewards: Validators that participate in the Exchange Rate Oracle get a portion of seigniorage if they faithfully report and win the ballot (vote within the reward band around the weighted median).

Besides revenue, there are scarcity incentives:

  1. Swap fees: A small spread is charged on atomic swap transactions between Luna and any Terra currency, which is burned and creates scarcity in Luna and indirectly rewards validators. Note that validators can set commission on the fees their delegators receive as additional incentive.

If validators double sign, are frequently offline or do not participate in governance, their staked Luna (including Luna of users that delegated to them) can be slashed. The penalty depends on the severity of the violation.

Terra also minted 1 billion SDT (SDR stablecoin) at genesis. This SDT reserve exists to augment Terra's stability mechanism. Core to Terra's stability mechanism is the swapping of stablecoins to Luna - and while this is effective in normal conditions, when there is large changes in stablecoin demand in either direction the cost for the swap increases significantly: swap fees increase quadratically as one side of the fee is favored (and normalizes back over time), so in times of rapid demand change the fee goes up significantly, which makes it difficult to accommodate payment operations requiring a very tight spread. During times like this Terraform Labs swaps SDT to KRT and sells that for KRW to Chai. When Chai merchants settle out, Terraform Labs maintains that KRW in a fiat reserve to buy back KRT."

"There are two sources by which 1 UST can be minted:

1) Either by burning LUNA

2) By burning other Terra stablecoin which can be KRT, SDT, MNT or any other terrastablecoin

LUNA that is burnt is burnt on-chain by users when they swap LUNA they are holding to a stablecoin (KRT/UST). It can be anyone burning that LUNA - its a mechanism open for everyone

For Foundation, specifically, currently Phase 1 i.e minting of stablecoins UST with KRT/SDT burning is currently dominant. The reliance on SDT reserves will reduce significantly in future as (a) LUNA-UST swap pool increases and (b) we have a market oriented mechanism to keep the UST peg. Our collaboration with Hummingbot is also a step in that direction.

So, all-in-all, currently 2) dominates (Phase-1) but as size of LUNA-UST swap size increases and we move to more market oriented mechanisms to manage the peg (Phase-2), 1) would dominate."

Fee Mechanisms

Upgrades

"The Terra ecosystem has begun the process of a soft fork migration to Core@v0.4.1 to provide improved support for Terra smart contracts and dApps scheduled to ship in 2021. Developers can look forward to contract execution and query speed 100x faster than in v0.4.0."

"Columbus - 2 June 2019:

Upgraded oracle to be robust against (front-running, validator key exposure), atomic swap safeguards (bidirectional LUNA supply change on market swaps, bidirectional LUNA spread fees on market swaps, change oracle reward scheme from montly seigniorage to validators to minute distribution, swaps halt immediately after illiquid oracle vote), improved CLI/REST interface, improved documentation

Columbus 3

Increased LUNA staking rewards (tax rate for Terra transactions increase from 0.11% to 0.5%, seigniorage rewards distributed in oracle rewards), on-chain governance rights for LUNA (including parameter chains, monetary policy changes, community pool spend, general text proposals), tax examption for LUNA transactions, improved network security (increased slashing penalties, slashing for oracle negligence), increased robustness of oracles and swaps (Tobin tax for Terra<>Terra swaps, uniswap revamp for Terra<>LUNA swaps)"

"Terra plans to release its newest mainnet upgrade, Columbus-5 which is tentatively scheduled to come online late Q2/Early Q3 2021. Among the proposed updates, a major feature is a refined seigniorage distribution model that further tightens the supply of Luna. In this new model, the recaptured Luna value currently earned through UST minting will be fully burnt and no longer re-routed to the community and oracle reward pools, inherently reducing the overall supply of Luna. As the maximum supply of LUNA is 1 billion tokens(Issued at genesis), it now becomes more deflationary as Luna value recaptured via seigniorage is completely removed from the supply. As the demand for Terra stablecoins grows, the circulating supply would only continue to reduce over time. Additionally, Columbus-5 mainnet upgrade will also see a portion of community funds being used to finance the build-out of Osmosis Zone (An AMM DEX set to launch on Cosmos) allowing for any connected blockchain in the Cosmos ecosystem to swap for Terra assets. With the recently approved Cosmos Inter-Blockchain Communication (IBC), pending integration into Solana’s Wormhole Bridge (Will Connect Ethereum, Solana and Terra) and the upcoming Columbus-5 upgrade, UST will become accessible to previously isolated blockchains."

"In a nutshell, the upgrade aims to facilitate scalability and interoperability with Cosmos. The major impact will be to increase the widespread adoption of $UST and the development of an efficient and interoperable ecosystem. The upgrade has many changes, out of which four are the most significant:

1. Burning LUNA seigniorage 2. Stargate upgrade 3. Wormhole Launch 4. Ozone Protocol integration."

As Do Kwon put the burns: "$832M $LUNA casually burned at col-5 genesis block"

Staking 

"For every transaction that goes through Terra, a variable tax rate is charged and redistributed to staking token holders. This tax rate is designed to support a continuous increase in staking rewards so that in times of slow network growth it expands and during times of high growth it contracts. This feature was introduced with the Columbus-3 hard fork on December 13th and was held at 0.1% prior to that. It has since its introduction been climbing from 0.5% to now currently 0.8%, coming closer to its maximum of 1%."

"Staking rewards in Terra are denominated in KRT and can, therefore, yield compounding returns when those KRT are used to purchase more LUNA which is used for staking. The percentage staking yield vs LUNA in Terra is consequently inversely proportional to the price of LUNA - the higher the LUNA price becomes, the lower the APY gets even if the absolute tax returns for the protocol are growing. The protocol automatically responds with increases in tax rates to these situations to return the APY into higher territory. The following graph illustrates this relationship."

  • From Our Network #40 (25-9-2020):

"After being live now for 17 months on mainnet, 54 validators from 18 nations provide security to the Terra network, with a fairly even distribution between North America, Europa, and Asia. Peak delegation activity since Columbus-3 was launched occurred in the week of June 14, 2020, when 35 million LUNA (~$10.5m at today’s prices) were bonded. Total delegations have increased from 172 million LUNA in December to now over 298 million LUNA, an increase of 73% in delegated tokens."

  • Figment is a staker. From their website (9-3-2020): "Early test-net participant and genesis block producer. Serving world’s largest LUNA holders, including the Terra team. Rewards are received in stablecoin tokens. Receive 88% of staking rewards (12% fee)."
  • Other known validators (2-12-2020) are:

MANTRA DAO, Nodeasy, huobipool, mainnet-validator, and node-x

"In June, we announced that we spun down TFL-hosted validators Goliath and Marine. In consideration of the growing maturity of the Terra network and the community’s increasing participation in governance decisions, we decided to officially spin down the last two TFL validators, Ghost and Wraith, on October 8th. The Terra network is now entirely secured by validators from the community."

“All network transaction fees paid in UST on Mirror, Anchor or any other protocol for that matter accrues to LUNA stakers

For example- in case of Mirror, All in, there are 3 types of fees on Mirror: 1) Minting fees: Goes to MIR stakers 2) Trading fees: 0.3 percent of the trade is charged as trading fees and it goes to liquidity providers for that pair (similar to the mechanism in Uniswap) 3) Network Transaction fees: Goes to LUNA validators/delegators

Mechanics of Anchor fees will be out later. But network transaction fees, of course, will accrue to LUNA (somewhat similar to how all transactions on Ethereum require gas)”

 Liquidity Mining

Scaling

Different Implementations

Interoperability 

Wormhole

  • "Terra is building (15-10-2020) a high speed token bridge to Solana, enabling the hyperfast transaction of Terra stablecoins on all of Solana’s Dapps."

"@everstake_pool, @CertusOne building the Wormhole bridge to take the Anchor rate interchain"

  • Wormhole, which connects Terra, Ethereum, BSC and Solana has gone live (10-8-2021):

"Wormhole’s 19 validators check if an asset is locked up on Chain A so that a copy of it can move freely on Chain B."

Project Dawn

"Striving towards a world where all blockchains can seamlessly communicate, Terraform Labs has put forward $150M worth of its LUNA tokens. They are calling the fund Project Dawn."

Other Details

  • From Our Network #40 (25-9-2020):

"An archival node for Terra requires almost 1 TB of data already. ChainLayer has built Quicksync, a tool to download the latest snapshots to solve this problem.

Infura is an incredibly important tool for any Ethereum developer, and Figment is building something equivalent for Terra, DataHub.

Monitoring delegations and large fund movements can be a crucial tool; DSRV Labs has built LunaWhale to do precisely that."

From the website (15-12-2020):

"Terra supports smart contracts, enabled by CosmWasm technology.
Developers are able to:

  1. Build smart contracts in Rust, Go, or AssemblyScript
  2. Run on multiple chains, connected by the Cosmos IBC
  3. Use Terra stablecoins, on-chain swaps, layer 1 oracles as primitives
  4. Expose dApp userbases to Terra's payment services in a permissionless fashion"

Oracle Method

"There are multiple oracle solutions that are active. Each validator can choose their own oracle voter software."

  • When asked how a 3rd party oracle provider could tap in, he answered (10-8-2020):

"Just create a oracle feeder implementation. Terra core simply consumes oracle votes that are provided by third party oracle feeder systems. Any sort of implementation can be plugged jn. Currently terra validators run 4-5 different oracle solutions run by @hyung-bharvest @J (Node A-Team) @zmanian and think band protocol is working on something. We have several solutions developed inhouse as well."

Privacy Method

"Not at the moment - perhaps integrate with Secret network? ool" (sic). In 6-2021 it was announced Terra and Secret Network would partner up.

Compliance

  • When asked why Terra did not have a public sale, Do Kwon answered the following in Discord (8-1-2021):

"Ah lawyers thought it would be risky. Private sales are much less risky compared to public sales. In retrospect dont think it would have mattered all that much [legally]."

Their Projects

Anchor

"Decentralized finance (DeFi) platform from Terra, Cosmos, Web3 Foundation and Solana. Anchor is a two-pronged platform for PoS token holders. The system offers savings accounts and a lending platform."

"A savings protocol on the Terra blockchain. Anchor offers a principal-protected stablecoin savings product that accepts Terra deposits and pays a stable interest rate. To generate yield, Anchor lends out deposits to borrowers who put down liquid-staked PoS assets from major blockchains as collateral. Anchor’s yield is thus powered by block rewards of major Proof-of-Stake blockchains. Ultimately, we envision Anchor to become the gold standard for passive income on the blockchain."

BuzLink

"Terraform Labs launches Buzlink, a marketing platform that puts referral marketing on steroids."

CHAI

"To better understand where these rewards are actually coming from, a look at Terra’s merchant integrations through the CHAI wallet is necessary. There are currently 24 merchants integrated with CHAI and rising. These merchants range from food delivery services to classic e-commerce websites. The CHAI data is uniquely insightful into consumer spending behavior at scale. For example, across all merchants, a consumer is 20% more likely to make a purchase on a Monday vs a Thursday or the percentages of processed refunds fall by 33% on weekends vs the weekly average."

"Unrolled the CHAI Card, which has been integrated with Samsung Pay and raised $60 million in its Series B round led by Hanhwa Investment & Securities and supported by Softbank Ventures Asia, SK Networks, Aarden Partners, and several other strategic investors. The round tops off CHAI’s total funding in 2020 to $75 million, raising $15 million in its Series A in February. CHAI has acquired leading payments aggregator I’mport, which serves 1700 merchants in Korea and processes $3B+ in annual transactions, enabling e-commerce companies to easily integrate over 20 payment methods, including debit and credit cards via local payment gateways, digital wallets, and PayPal, to name a few."

Mirror Protocol

Mirror will be "A way to mint crypto assets that mimic the value of shares in publicly traded companies like Apple or Tesla."

"Mirror attained >100 MILLION in TVL within the first 3 weeks of launch."

Ozone

Terraswap

Roadmap

  • Can be found here (8-2020):

"Terra Core will change in two major ways over the next two upgrades.

  1. With Columbus-4, Terra Core will become more expressive with the addition of CosmWasm smart contracts →cosmwasm.com
  2. With Columbus-5, it will become more interoperable with the addition of the Shuttle bridge module to create a message bus with multiple other blockchains. More details on Shuttle and Columbus-5 will be released in a later roadmap update as timelines and development progress become available."

Usage

"In a blog post, Terra said it recently crossed 1 million daily active users and $3 million in daily transaction volume."

"The total user growth of Terra has remained strong and almost 500,000 new users were onboarded over the last 3 months alone through the CHAI app. It is expected that CHAI onboards user number 2,000,000 sometime in September."

  • Terra hit the 2 million accounts milestone (2-9-2020).
  • From their blog (2-12-2020):

"November marks a milestone for Terra’s dapp — CHAI has crossed the 100 billion KRW threshold in payment volume across nearly 3 million transactions this past month alone. With CHAI topping dapp rankings for some time now, we are expectant of continual upward trajectory."

  • From their blog (3-3-2021):

"Due to the significant surge in demand for UST, the protocol has burned 80M LUNA to mint 447M UST since Jump Trading’s on-chain liquidity parameters went live at the beginning of February. (8% of the total LUNA supply)."

"Terra as the 3rd largest Layer 1 blockchain by Total Value Locked (TVL)."

"More than 10,000 new accounts were registered on each of the last few days of June, a significant increase over the 5,000 to 8,000 accounts that typically join each day. This is also the highest level of new account growth since the mid-March record-breaking peak caused by the launch of Anchor. Many of these new users quickly began investing in and using core Terra projects, including savings protocol Anchor and synthetic assets platform Mirror."

  • Everything lost huge amounts of value after the depeg event of May 9th 2022. From Bitcoin.com (21-5-2022):

"Statistics show on March 7, 2022, the Terra ecosystem of tokens was worth $44 billion and today its down 96.70% to $1.45 billion. Terra’s presence in decentralized finance was once very large as it held the second-largest total value locked (TVL) out of all the blockchains in existence. On April 5, 2022, Terra’s TVL in defi was $31.21 billion and today, it’s down to $118.81 million."

Projects that use or built on it

  • An ecosystem list can be found here.
  • From this thread (6-3-2022):

"Terra currently has 73 on-chain projects. And there are at least another 87 projects planning to launch in 2022."

  • A thread with 66 projects can be found here (28-7-2021).
  • Alice; DeFi App (13-5-2021).
  • Anchor; a savings protocol 

 Competition

Pros and Cons

 Pros

  • From Messari's year end report of 2020:

"Terra has quietly become one of the most commonly used blockchains in the world. It supports the largest non-USD pegged stablecoin (TerraKRW), and regularly generates higher transaction fees than any other blockchain outside of Bitcoin and Ethereum. That’s thanks to its Chai payment gateway, which sports millions of MAUs via its partner Korean e-commerce giant. The app has facilitated $3.5 billion of transactions so far this year with ($25 million in fees accruing to Terra holders, which gives Terra a compelling economic model. That gets even more interesting as the project gets better integrated across DeFi (Cosmos, Solana, Ethereum, and more are on the roadmap for 2021), and this might be the play to make if you’re interested in an Eastern alternative to algorithmic stablecoin issuers, as it’s not just dominant in Korea, but backed by major Chinese exchanges like Binance, Huobi, and OKex. Terra also scales! Unlike Maker, arbitrageurs can redeem and mint Terra stablecoins 1:1 for their underlying collateral."

"The key implication here is that the success of the Terra stablecoins is directly tied to the economic value of Luna (and thus, to the Terra blockchain). As opposed to Ethereum, in which current DeFi apps are parasitic to the blockchain, Terra stablecoin demand directly accrues value to the Terra blockchain. In this sense, the Terra blockchain is similar to Ethereum with EIP-1559 already implemented.

The key takeaway is that this system design creates a virtuous cycle in which the more a dapp contributes to the ecosystem, the more demand there is for Terra stablecoins, the more seigniorage there is to be distributed, the more dapps can earn, the more they can invest in their product to continue growing."

Cons 

Team, Funding, partnerships

Team

Funding

Binance, Huobi Capital, OKEX, #Hashed, Polychain, 1kx and Arrington XRP Capital.

"CHAI unrolled the CHAI Card, which has been integrated with Samsung Pay and raised $60 million in its Series B round led by Hanhwa Investment & Securities and supported by Softbank Ventures Asia, SK Networks, Aarden Partners, and several other strategic investors. The round tops off CHAI’s total funding in 2020 to $75 million, raising $15 million in its Series A in February."

  • From Do Kwon's Twitter (23-5-2021): "Just for clarification we currently hold only ~59M $UST"

Partners

"Terra is supported by the Terra Alliance, a group of businesses and platforms advocating for the adoption of Terra. In February 2019, the company announced that e-commerce platforms from 10 different countries, representing a user base of 45 million and a gross merchandise value of $25 billion, were members of the alliance."

  • Solana is partnering (15-4-2020) with Terra to use its stablecoin on the Solana network.

"On April 28, 2020, the Terra Protocol and Persistence announced that they would join forces to create a delegated Token Swap. Persistence will begin to ‘earn-out’ Luna Tokens (staking tokens of Terra) and other Stablecoins by running a Validator for the Terra Network operating at a 100% commission rate. Luna is delegated to this Validator by Terraform Labs. Persistence tokens are delivered to Terraform Labs once they begin to start trading publicly. This swap will encourage alignment between Terra and Persistence. And it will ensure token distribution to parties familiar with staking and enable a positive outcome for Persistence token."

"We are excited to become a validator for the LUNA token, the staking token that powers Terra’s Delegated Proof-of-Stake blockchain. This integration will allow Terrans and Sherpas to delegate their LUNA to the MANTRA DAO nodes to receive both LUNA and OM staking rewards, thereby bringing OM liquidity mining to the Terra ecosystem."

"Thrilled to reveal the blossoming collaboration between @avalancheavax and Terra will also be further solidified with a $100 million Treasury Swap between TFL and the Avalanche Foundation of $LUNA. The @LFG_org’s OTC deal to add $100 million of $AVAX to the $UST Reserve makes AVAX the first major crypto-asset besides $BTC to be added to the UST Reserve, marking the beginning of a diversified and non-correlated asset pool supporting the $UST peg."

Terraform Capital

  • From their blog (3-3-2021):

"Terraform Capital, Terra’s strategic investment arm seeded with $10M to fund audits for projects that incorporate UST/LUNA, is unveiled. Leading security teams Quantstamp, Sentnl, Solidified and Cryptonics are onboarded as audit partners for Terra Capital."

Terra Ecosystem Fund

"We like working with ambitious individuals looking to build incredible products. We make grants to new projects and developers and help them structure their concepts. We also help teams access professional legal and auditing services. Also, we invest in and co-incubate projects via our $150M ecosystem fund."

"Arrington Capital, BlockTower Capital, Galaxy Digital, Hashed, Lightspeed Ventures, Pantera Capital, Parafi, SkyVision Capital, Accomplice Blockchain, CoinFund, DeFi Alliance, Delphi Digital, Distributed Global, Dokia Capital, Iconium, Jump Trading, L1 Digital, Lattice Capital, Mechanism Capital, OP Crypto, QuantStamp, Rockaway Blockchain Fund and 01node"

Project Dawn

"Striving towards a world where all blockchains can seamlessly communicate, Terraform Labs has put forward $150M worth of its LUNA tokens. They are calling the fund Project Dawn."

Terra Global Founder Fellowship

"The Terra Global Founder Fellowship program launches with the aim of supporting projects building on Terra to further the expansion and growth of the Terra Ecosystem. Terraform Labs launches the Global Founder Fellowship with partners including JUMP Crypto, Delphi Digital, Outlier Ventures, Long Hash Ventures, SCB10X, Alpha Finance Lab, Ship Capital, Basis Set Ventures, Insignia Ventures, among others. The aim of the Terra Global Founder Fellowship is to work with top tier early-stage VC firms, accelerator programs, and tech unicorn companies to identify and support project founders with the resources they need to build dapps on the Terra blockchain, thereby helping to expand the Terra ecosystem."

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