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    What is Terra network and why is its token Luna scaling new highs?

    What is Terra network and why is its token Luna scaling new highs?

    What is Terra network and why is its token Luna scaling new highs?
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    By CNBCTV18.com  IST (Published)

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    Terra is an open-source blockchain platform for algorithmic stablecoins, that are pegged against traditional fiat. Terra's native currency Luna is a versatile token in the network that is extremely important in the rise of the terra platform.

    Luna, the native token of the blockchain network Terra has scaled a new all-time high of $90, extending gains for the four straight months, and defying the weakness in the broader altcoins market. It is now the second-biggest smart-contract platform after Ethereum.
    With a total market cap of over $34 billion, it is the 9th biggest cryptocurrency surpassing Polkadot and Avalanche, according to data from Coinmarketcap. Luna has risen almost 12,000 percent over the last year, starting from under $1 at the start of the year.
    Terra is an open-source blockchain platform for algorithmic stablecoins, that are pegged against traditional fiat. The terra platform allows users to trade Terra stablecoins easily and swiftly.


    The original white paper for Terra lists the co-founder of Terra Do Kwon as one of the authors. The report proposed a cryptocurrency named Terra that is both price-stable and growth-driven, based on the view that a price-stable cryptocurrency combines the best features of fiat currencies and Bitcoin (BTC).
    Terra's native currency Luna was made for governance and mining and used to issue stablecoins, pay network fees, and participate in governance votes. It is a versatile token in the network that is extremely important in the rise of the terra platform.
    Over the last week, the total value locked (TVL) has surged by 55 percent. TVL represents the number of assets currently being staked in a specific protocol, and it is a metric used to measure the health of a decentralised finance (DeFi) protocol. Put simply, it’s the overall underlying supply.
    The surge has helped it overtake Binance Smart Chain (BSC) in terms of TVF.
    But why is Luna rising?
    The rise in Luna's price can be attributed to a few factors. According to Delphi Digital, a leading cryptocurrency research firm, the negative funding rate in major exchanges signalled the presence of delta neutral traders, a group of investors who take multiple positions to offset delta exposure.
    "The price increase over the last few days was likely triggered by investors buying spot LUNA to lock up in the Astroport lockdrop, then hedging their position via perpetual futures to remain delta neutral," Delphi Digital said in a research note published on Monday.


    Another major factor for the price rise could be Terra's development in its burn mechanism. The proposal 44 announced in October aimed to burn 90 million tokens held in the community pool, similar to Ethereum's EIP-1559 upgrade that introduced the deflationary ETH burn mechanism.
    Terra pointed out on its official Twitter account, this represented “one of the largest, if not the largest burns of a major layer one asset in the crypto market’s history.”
    The point of burning Luna tokens from the community pool was to create scarcity of the asset and boost its price.


     
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