A handful of new stablecoins have been launched in 2020 and many analysts have suggested that the growth of stablecoin is the backbone of the crypto sector and is partly responsible for the current Bitcoin rally.
For many traders, stablecoins provide a safe place to hide during volatile periods in Bitcoin and altcoins, but there are other ways to interact with these fiat-linked assets.
Terra Protocol aims to create a programmable algorithmic stablecoin available on any blockchain. Similar to its more famous competitor Maker (MKR), Terra Protocol has a native stabilizing crypto asset called LUNA.
The project was created by a partnership of 15 major Asia-based e-commerce companies serving more than 30 million users. The ecosystem is focused on building efficient, scalable, competitive programmable payments.
Ahead of the March 2019 ICO, the company raised $ 32 million in a seed funding round that includes Hashed, Polychain Capital, Huobi and XRP Arrington Capital.
The main element of Terra is the Chai payment app, which has now been downloaded more than a million times on the Android Store. Users can collect points that can be redeemed for merchant rewards at Chai’s partners.
These partners include TMon, Qoo10, Yanolja, Megabox and Musinsa, who offer benefits in exchange for marketing promotion for Chai’s membership base.
The company also offers a debit card, the Chai Card, which launched in June 2019. On December 9, Chai received a Series B investment of $ 60 million from SoftBank and Hanwha Investment & Securities.
Stablecoin and yield mechanism
The protocol runs on a proof-of-stake blockchain where miners must use the native cryptocurrency (LUNA) to mine Terra transactions.
Recently, the market capitalization for the TerraUSD (USTstablecoin surpassed $ 150 million, an important milestone given the token launched just 3 months ago.
According to Terra’s white paper, LUNA
“Achieves price stability through an elastic money supply, enabled by stable mining incentives. It also uses seigniorage created by its currency operations as a transaction stimulus, facilitating adoption.”
Unlike most decentralized financing applications, LUNA uses its own miners as oracles. The weighted median of votes achieves the target fiat pricing and miners are rewarded for their accuracy.
Currently, most of the revenue comes from the purchases of e-commerce customers using the CHAI app. This means that LUNA token holders have great incentives to stake.
On July 6, Terra blockchain introduced its savings protocol called Anchor. Unlike most DeFi applications, it offers a principal-protected stablecoin that pays an interest rate.
Anchor acquires TerraUSD (USTstablecoin deposits and will eventually be able to use the funding to acquire positions on various blockchains. This enables interoperability with proof-of-stake blockchains and also generates passive income for depositors.
It is worth noting that Anchor does not include any potential for stakeout of Ethereum ecosystems as these do not provide proof-of-stake.
Synthetic Assets and Referral Marketing
More recently, on December 4, LUNA launched a DeFi initiative called Mirror Protocol, which enables synthetic assets through on-chain price exposure. This includes stocks, commodities and ETFs, and the platform uses Band Protocol (BAND) Oracle solutions for pricing.
During this process, some problems emerged. There was a lack of pricing mechanisms on weekends when traditional markets are closed. Another issue was the 150% collateral requirement in LUNA stablecoin.
The most recent product unveiling took place on December 10 when Terra Protocol launched BuzLink, a marketing platform that rewards the entire referral chain when a sale is made.
The marketing tool distributes stablecoin rewards to product referrers through the Terra blockchain. Therefore, when a user purchases the product, all users who share the product link benefit.
Data from TheTie also shows that price spikes were accompanied by increases and decreases in social network activity. This suggests that traders can take advantage of closely monitoring Terra Protocol partnerships and announcements to detect less active periods as these are typically associated with price stagnation.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the view of Cointelegraph. Every investment and trade move carries risks. You should do your own research when making a decision.