The global financial structure is quickly taking a new direction as more and more investors are looking to get into cryptocurrencies. Every week, massive cryptocurrency sell-offs are recorded as its overall market capitalization keeps on growing. More and more new cryptocurrencies are being introduced all the time. One in particular that has caught the eye of many investors is the LUNA coin.
LUNA is a stablecoin that was introduced by the Terra blockchain network which itself was founded by Terraform Labs. Its interoperability feature means the coin can be traded in other blockchain networks too. LUNA has carved out a reputation for being able to consistently remain one of the most traded crypto tokens that have not lost value of late. This has made LUNA one of the leading coins in terms of market capitalization, despite being on the market for a shorter time.
The popularity of LUNA is attributed to Terra’s algorithms which are aimed at enhancing the price stability of its many stablecoins. Investors, therefore, have the least worries about their coins losing value. Should you invest in LUNA? In this post, we have all your questions about LUNA answered.
What is LUNA?
LUNA coin is a crypto stablecoin that operates on the Terra protocol blockchain which was created in 2018 by Terraform Labs. The LUNA coin is the native token of Terra alongside the Terra coin. The Terra blockchain introduced stablecoins which are pegged to various fiat currencies including the US dollar as a means to curb the high price volatility experienced in cryptocurrencies.
Why is LUNA becoming so popular?
LUNA comes from Terra, a blockchain network working towards solving problems experienced in other popular blockchain networks such as Ethereum. Terra uses the proof of stake mining protocol as opposed to proof of work protocol which is considered to be faster.
Terra aims to minimize centralization, an issue affecting many of the leading stablecoins. The terra protocol can function in several blockchain networks like Loop, allowing users to freely trade many of the Terra stable coins. The open financial infrastructure has been the key to Luna and other Terra stablecoins becoming popular since there are no technical limitations on their coins.
How does LUNA maintain its stability?
To ensure that the Terra stablecoins like LUNA are not affected by price volatility, Terra employs a programmable infrastructure to ensure its coins are self-stabilizing. Terra uses the elastic monetary supply policy to regulate the supply of its coins and consequently ensure stability. This policy automatically regulates the number of Terra stablecoins in circulation to ensure the coins are always tethered to the value of their financial assets.
What is LUNA staking?
Apart from trading with LUNA, you can also stake your LUNA coins and earn some amazing rewards in form of airdrops. Staking is also a means of ensuring stability and the stakers are rewarded rewards generated either from transaction fees, taxes, compute fees, or seigniorage. Luna plays a key role in ensuring the price stability of the Terra coins as well as maintaining the value of the Terra ecosystem in staking.
Lately, LUNA coin has been one of the top-performing cryptocurrencies on the market and it is projected that it might perform even better. However, you should note that every cryptocurrency comes with risk and this includes stablecoins. Before you invest, ensure you have an understanding of the future might unfold.