Stable coins are an aspect of cryptocurrency that often goes unnoticed. But this is a sector in which Terra has done great. There are many stablecoins out there that are a digital version of the US dollar and are hugely popular, but Terra has surpassed all of them. In 2021, its token Luna performed exceptionally well, as did the Terraform Laboratory project to support decentralized tokens. This is also due to the excellent performance of the Luna token, which has grown more than 25 times over the past 5 months.
What does Terra’s stablecoin have to do with Luna?
All stable coins are tied to another coin or something from which they derive their value. This is to maintain the value of the coin and keep it stable. For example, a coin linked to Ethereum could be stable if the market capitalization of the entire stable coin is below that of ETH. That is, if $ 1 billion worth of stablecoins are put on the market with $ 2 billion in ETH, a 50% fluctuation in price can be offset and the stable coin price can be kept intact. Here the ETH plays the role of a governance coin on which the stable coin is based.
And in the case of TerraUSD, Luna plays the role of the governance coin. The higher the value and market capitalization of Luna, the higher the value of a stable coin. Another reason for the enormous growth of the Terra platform are the two main applications. The first is the mirror logs that anyone can use to create real-world assets like stocks and the anchor log that is used for saving and borrowing.
Stable coins are attractive investments
Not everyone wants an amazing return with the risk of volatility. And for them, stable coins are a good investment. They can hold their value and help users keep the value of their money intact. And the best part is that they have peace of mind as they are not very volatile. And while traditional stable coins are tied to assets or even a currency, algorithmic stable coins are now emerging that can use software to keep the value of money intact.
What do you think of Terra’s huge market surge and Luna’s price surge? Let us know in the comments below. If you found our content informative, like it and share it with your friends.
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