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<\/p>\nThe price of Terra\u2019s native token $LUNA is up over 10,000% year-to-date thanks to growing demand for its algorithmically backed stablecoin, USDT, and for token burns that have seen a significant portion of LUNA\u2019s supply get removed from circulation.<\/p>\n
According to Binance Research, Terra is a Proof of Stake (PoS) blockchain. They also say that LUNA\u00a0is \u201cused in the issuance of stablecoins (TerraSDRs), as a price stability mechanism, as well as for staking and network governance.\u201d<\/p>\n
Terra was developed by South Korean blockchain company Terraform Labs, which itself was founded in January 2018 by Danial Shin and Do Kwon. Terra\u2019s mainnet was launched in April 2019 and its native token initially saw relatively muted price performance. Earlier this year, LUNA\u2019s price started jumping.<\/p>\n
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LUNA is now the eleventh largest cryptoasset by market capitalization and is trading above $67.6 a token. Its total market capitalization is now $26.1 billion. Its price has been surging partly because it supports smart contracts and, as such, decentralized applications. Other blockchains supporting these decentralized applications have also seen their prices explode this year.<\/p>\n
According to DeFiLlama data, LUNA\u2019s decentralized finance applications have over $13.4 billion worth of cryptoassets locked in them. Part of the demand for DeFi on LUNA is related to its algorithmic stablecoins used on apps like Anchor, Mirror, and Pylon.<\/p>\n
Mirror, Bloomberg reports, offers tokens mirroring U.S:-traded stocks, and triggered a probe from the U.S. Securities and Exchange Commission (SEC) as to whether it was selling unregistered securities or not.<\/p>\n
Earlier, the LUNA community approved a governance proposal to permanently burn 88 million tokens from the community pool, swapping it for Terra\u2019s USDT stablecoin. The move has helped UST\u2019s market capitalization surge from $2.9 billion in early November to over $7.8 billion at press time.<\/p>\n
LUNA\u2019s token burns were further supported by a recent upgrade, which saw tokens committed to creating UST get burned instead of stacked in a community pool. Over 100 million LUNA have already been burned.<\/p>\n
To some observers, the LUNA token burns coupled with staking activities that allow token holders to earn interest on their holdings while securing the network, has led to a supply shock on exchanges that drove up the value of the cryptocurrency.<\/p>\n
Terraform Labs\u2019 head of communications Brian Currency was quoted in Bloomberg\u2019s report saying that \u201cmostly everything\u201d the company does to support the Terra ecosystem \u201ccreates more demand for USDT,\u201d which results in Luna\u2019s price dynamics functioning based on demand for UST.<\/p>\n
DISCLAIMER
The views and opinions expressed by the author, or any people mentioned in this article, are for informational purposes only, and they do not constitute financial, investment, or other advice. Investing in or trading cryptoassets comes with a risk of financial loss.<\/p>\n
IMAGE CREDIT
Featured image via\u00a0Unsplash<\/p>\n