Curious about what Terra Luna is (or used to be)? You’re definitely not alone. The Terra blockchain network, which gained popularity for its stablecoins, has undergone significant changes recently. Especially with the introduction of Terra Luna 2.0.
In this guide, we will understand what the Terra blockchain is, what LUNA is, how it works, and the changes that have come with the new iteration. By the end, you’ll have a clearer understanding of Terra, its history, and its potential future.
What is Terra Luna?
Terra is a blockchain platform used for algorithmic stablecoins to maintain a balance with its cryptocurrency, Luna.
Luna is vital for a few reasons: it helps with governance, allows staking in the network’s Delegated Proof of Stake (DPoS) consensus mechanism, and ensures the stability of Terra’s stablecoins, like TerraUSD (UST).
The involvement of Luna holders has shown that when people are engaged in governance, the price volatility of stablecoins decreases.
What is Terra Luna 2.0?
After a major crash that impacted the original Terra Luna ecosystem (and the entire crypto market to be honest), a new version emerged: Terra Luna 2.0. This regeneration strategy, led by Terraform Labs, focused on rebuilding trust and creating a stronger foundation. Luna 2.0 operates on a new blockchain without relying on the controversial algorithmic stablecoin UST. The new system occasionally issues additional tokens via airdrops to previous Luna holders affected by the crash.
Terra Luna 2.0 operates on a proof-of-stake model and includes several decentralized applications (dApps) from the original Terra blockchain, such as Terraswap and Astroport, which have helped retain its utility and user base.
How Does Luna Work?
Luna powers the Terra network by serving several key functions:
Staking and Consensus mechanism: Luna runs on a proof-of-stake (PoS) system. As a Luna holder, you can stake your tokens to validators who handle transactions and keep the Terra blockchain running smoothly. Validators are chosen based on how much Luna they have staked. You can earn rewards from transaction fees and newly created Luna by staking your Luna.
Governance: Holding Luna also gives you a voice in the network’s governance. You can propose and vote on changes to the protocol, like technical upgrades or economic policies.
Stability Mechanism: Originally, Luna played a key role in maintaining the price stability of Terra’s algorithmic stablecoins, like TerraUSD (UST). When demand for UST went up, Luna was burned (destroyed) to mint more UST, reducing Luna’s supply and helping to keep UST pegged to the dollar. On the flip side, if there was too much UST, it was burned to mint Luna, helping to stabilize its value.
Incentives for Development: Part of Luna’s supply is allocated to developers to encourage the creation and maintenance of decentralized applications (dApps) on the Terra blockchain.
Difference Between Luna 2.0 and Luna Classic
Now that you’ve understood what Terra Luna is and how it works, let me give you an overview of how it differentiates itself from Luna 2.0.
| Feature | Luna 2.0 | Luna Classic |
| Native Blockchain | Terra Luna 2.0 | Original Terra Blockchain |
| Stablecoin Connection | No | Connected to USTC stablecoin |
| Total Supply | > 1 billion | 6.83 billion |
| Market Cap | $580 million | > $1 billion |
| Token Burning Mechanism | No token-burning mechanism | Token burning mechanism in place |
| Use Cases | Development ongoing, various potential applications | Initially diverse, now focused on decentralization |
Is Terra Luna 2.0 Secure?
Luna 2.0 uses a group of 130 validators to secure the network via proof-of-stake. Despite previous setbacks, no major security issues have been reported with the new blockchain. However, crypto investing remains inherently risky. It’s crucial to perform thorough research and understand the risks before starting any blockchain project.
The Future of Luna 2.0
The future of Luna 2.0 is a bit of a rollercoaster ride. Since its launch, it has faced a lot of ups and downs. Some predictions say that by December 2025, Luna 2.0 could achieve a price of $228.39, possibly hitting a high of $262.65, but it could also dip as low as $194.13.
Back in November 2023, Luna 2.0 was trading at just $0.45, which is a steep drop from its launch price of $17.80. Looking further ahead, there’s a prediction that by 2030, it might fall to as low as $3.28.
The key to Luna 2.0’s future is the community’s support and their efforts to stabilize and grow the ecosystem, especially without a native stablecoin. Cryptocurrencies like Luna 2.0 are definitely high-risk investments. It’s crucial for you to do your homework, only invest what you can afford to lose, and be ready for a bumpy ride with lots of price swings.
What’s next for LUNA?
Terra has obviously seen significant changes, transforming from its original form to Luna 2.0. Its future is still uncertain, but we can see how a project can adapt to market changes. If you’re interested in blockchain, decentralized finance, and stablecoins, Terra is worth keeping an eye on.
For more insights and updates on blockchain technology, check out Blockverse!
