Terra has taken the South Korean market by storm. By incorporating clever tokenomics and strategic partnership, Terra aims to become the first price-stable, widely adopted cryptocurrency. One of the many interesting things to note about Terra is its dual-token ecosystem. The two tokens are:
- Terra: The stablecoin which will be used by people in the real-world to conduct transactions.
- Luna: The staking coin in Terra’s proof-of-stake ecosystem. Luna is subject to market volatility.
Luna is currently uniquely positioned to become one of the hottest coins of 2020. In this article, we will tell you why Luna has immense growth potential, and why you must look into it.
Leveraging a growing network via Metcalfe’s Law
As per Wikipedia, Metcalfe’s law states the effect of a telecommunications network is proportional to the square of the number of connected users of the system. The law was formulated by the inventor of Ethernet and the co-founder of 3Com.
Image Credit: Andrew Chen
In simple terms – more the people involved in a network, more its value.
To understand how it works, consider the following example:
Image Credit: Wikipedia
If only one person owns a telephone, then it won’t be that valuable. However, as more and more people join the network, the value goes up exponentially, since more people will be able to connect and share information with each other. This is the reason why social media networks like Facebook have exponentially increased in value as more people joined in.
What we can infer from this is that as the network and, more importantly, its usability increases, its value will follow suit as well.
So, what is so special about Terra? What is driving its usability and adoption?
Terra’s Mainstream dApp – CHAI
CHAI is a payments dApp, which allows its users to pay for items, via the Terra network. To help you gauge the popularity of CHAI, consider the following numbers it managed to hit in just four months:
- Reached >500,000 users.
- Processed more than $54 million.
- Saved $810,000 for their merchants.
- Hit an annual run rate worth $375 million.
In the later part of 2019, during the Korea Blockchain Week, CHAI announced four partnerships which will further bolster its popularity – BC Card, Korea’s leading payment processing company to provide end-to-end payment services, Yanojla, a popular Korea hotel booking service, Shinsegae Duty-Free, a leader in Korea’s duty-free shopping market, and CU, the nation’s largest convenience store-chain franchise.
The BC Card partnership, in particular, will lead to the creation of the CHAI card. The CHAI card is a debit card that will allow users to pay for anything using the Terra Network.
All these partnerships will not only increase Terra/Luna’s userbase, but it will make their network extraordinarily active and busy. In fact, Terra and its networks of partners are projected to earn $75 billion by 2025.
As such, Luna has a very realistic chance of leveraging Metcalfe’s Law to increase its own valuation.
Getting rewarded for holding Luna
Unlike other proof-of-stake networks like EOS, Terra doesn’t inflate its circulating supply to reward its stakeholders. Instead, they are paid with “Terra tax,” which is a percentage of all the transactions happening within the network. According to this article, the Terra tax rate was just 0.05% back in September and October 2019. However, following the Columbus-3 hard fork, the tax rate went up to 0.5% and is hovering around 0.625%, as of writing. Plus, it has also been noted that even though the price of individual Luna tokens has gone down in recent times, the annualized reward rate has actually spiked by an impressive 17.54%, with 22.43% of the circulating tokens locked up within the network.
Another cool feature of Terra’s staking mechanism is that you don’t need to actively participate in it. You can simply delegate some of your Luna tokens to an active validator and earn passive income. So, to keep it simple, holders have an opportunity to earn rewards in a system, which has grown impressively over time, without having to participate in it actively.
Conclusion
As per Terra’s website, its mission “is to free people from the hidden fees embedded into everyday payments. We strip away these inefficiencies by harnessing the power of blockchain technology.” To match their ambitions, they have used innovative token architecture and leveraged several vital partnerships to put themselves in the prime position to take over the financial world. Due to Terra and Luna’s potential, don’t be surprised if Luna grows explosively over 2020.
