Ether and Bitcoin have fluctuated in the past so people are now keen on investing in stable coins such as Terra mostly due to their predictable prices:
Due to the reason that Ether and Bitcoin have fluctuated in the past, people are now keen on investing in stable coins such as Terra mostly due to their predictable prices. Terra is a public Blockchain technology, which makes Defi accessible to the general public because it uses some algorithmic decentralized stable coins to drive a vibrant ecosystem.
TerraUSD (a stable coin created by Transform labs) is one example, as it keeps its peg to the US dollar to sell and purchase LUNA, (its crypto currency) by relying on a network of arbitrageurs.
The Terra ecosystem is a fast-growing network of decentralized apps:
The spike in the price of Terra (from forty-seven dollars to ninety-one dollars) spiked sharply around the start of the Russia and Ukraine conflict. The Terra ecosystem founded by Transform labs in 2018, is a fast-growing network of decentralized apps that results in rising Luna prices and sustained demand for Terra.
On the Terra blockchain, the users can spend, trade, save and swap Terra stablecoins (the stable coins are created to track the price of any fiat currency using a combination of decentralized Oracle voting and open marker arbitrage incentives).
To mint Terra you must initially pay the going rate in Luna:
To purchase Terra one has to mint it. And to do so you must initially pay the going rate in Luna. The price of Luna is raised slightly as the protocol consumes Luna and burns them, limiting their availability.
The converted stable coins to mint Luna are burned and the price of Terra rises by a small portion. Their success (that the elasticity of LUNAs supply ensures that the stable coin will never be out of balance) is contingent on the arbitrageur’s sustained interest in Terra.
In this crypto project, community spirit is crucial:
Terra will not be arbitraged back to $1 peg if the arbitrageurs relocate their money to a different project or if they determine that Terra will fail. And in this crypto project, community spirit is crucial.