Terra (LUNA) Market Analysis
I. Introduction
Terra Protocol, an asset stabilization protocol, along with the synthetic asset protocol, Mirror Protocol and the DeFi savings protocol, Anchor Protocol are the three major DeFi protocols launched by Terraform Labs.
LUNA is currently circulated within the Terra Alliance’s payment alliance, where stable asset payments are mainly made through the CHAI and Meme Pay payment tools. CHAI is a key product of Terra’s stable asset ecosystem, bringing transaction volume and users to Terra.
Mirror uses this protocol to mint and trade synthetic assets such as stocks, futures, gold, and exchange funds. Users can directly trade various top global assets on it, with 21 synthetic assets that are currently online.
The Anchor Savings Protocol, a new DeFi savings product jointly announced by Cosmos, Polkadot, Terra and Solana, is designed to provide a safe and reliable interest rate for stable asset deposits. The protocol will provide a stable assets savings product involving the protection of principal that accepts Terra deposits and pays stable interest.
Terra’s stable assets TerraSDRs achieves price stability by adjusting supply according to demand fluctuations:
When demand surges, causing Terra prices to rise, the system will begin balancing operations to ensure that assets do not deviate from their fixed exchange rates. As demand increases, the supply of tokens needs to increase to offset that demand. The protocol solves this problem by minting and selling Terra to increase the market supply of tokens.
When an arbitrager gains a risk-free profit of 1 LUN SDR by purchasing a newly minted TerraSDR, he can immediately sell it for profit. Luna is basically using the newly minted Terra as collateral to regain that value. This mechanism, known as seigniorage, represents the profit from minting Terra (almost zero minting cost).
If Terra’s price is lower than the fixed price, the supply of Terra needs to be reduced to maintain the fixed price. The shrinkage model is handled by the protocol by minting LUNA and providing 1 SDR of the LUNA for 1 TerraSDR with a Terra valued at less than 1 SDR.
The declined value is therefore absorbed by the LUNA holders, and as the supply of Luna is diluted, the value is transferred from Luna’s collateral assets to raise Terra’s price.
II. Tokenomics
LUNA is Terra’s underlying deflationary, issuing a total of 1 billion copies, mainly for:
1. For the issuance of stable assets (TerraSDRs), price stabilization mechanisms, and network governance;
2. Acts as Terra’s asset stabilization engine and maintains the collateral of stable assets in the ecosystem through an algorithm, with system fee earnings owned by the LUNA holder;
3. LUNA can be used as a trading medium throughout the Terra ecosystem.
The distribution of LUNA is as follows:
10% assigned to Terraform Labs to facilitate research and development of Terra projects
20% allocated to early team members and investors to compensate the team members and investors who contributed to the project
20% is allocated to the Terra Alliance to promote early adoption and use of Terra, and this pool is used to set incentives, mainly for market discount schemes (e.g., user coupons) and volume incentives for partners.Terraform Labs will task managers to obtain input from the community to best allocate resources from the pool
20% for stability reserve, which will be used to manage the early stability of the network near launch
4% used to create liquidity during launch, in which LUNAs are sold near genesis to allow everyday users to use and interact with them
26% allocated to investors to obtain funds for Terra project development
III. Core Team
Daniel Hyunsung Shin，Founder &CEO
Daniel graduated from Wharton Business School with a Bachelor of Economics and is co-founder and former CEO of TicketMonster, an e-commerce platform in South Korea. And also, is a co-founder of Fast Track Asia, a company builder.
Do Kwon, Co-Founder
Kwon graduated from the Department of Computer Science at Stanford University. Former founder and CEO of Anyfi. During his tenure in Anyfi, the Kwon Group invented several key patents for the company.
Nichola Platias, Director of Research
Nicholas studied mathematics and computer science at Stanford University and won many medals in the Mathematics Olympics. He developed algorithms and distributed systems at Nest and RelatelQ, and later created Guru Labs.
IV. Financing Situation
Terraform Labs are making three sales:
Seed sale: with unit price of 0.16USDT, and about 192 million tokens. Lockup for 10–18 months, with initial liquidity is 30%.
Private sale round: with unit price 0.80USDT, and about 18 million tokens. Lockup for 3 months and then unlocked for 6 months for linear release.
ICOHolder data show that the Terra project has undergone 14 rounds of financing, raising a total of US$58 million.
V. Situation of the Secondary Market
LUNA currently has a price of 1.866 USDT on March 31, with a circulation of 390 million pieces, a circulation market value of 7.3 billion USDT, wherein the market value is ranked 18th. Currently launched on MXC Exchange and other platforms.
VI. Application Scenario Analysis of Terra (LUNA)
The practical scenarios for LUNA come from:
1. In mining, the amount of LUNA represents the mining scale and pricing rights
2. E-Commerce Settlement
3. Minting tax and transaction fees
4. Miner Incentives
The selling pressure of LUNA comes from:
1. The unlocking or cashing out of seed and private sale
2. Possible cash arbitrage for Terraform Labs
3. Possible early unlocking and cashing out of early team members
