Cointelegraph Consulting: The bigger role of LUNA in Terra
In an interview, Do Kwon, co-founder and CEO of Terraform Labs, said that Terra’s ecosystem was built with several use cases such as savings, payments, investments and others that leverage its stablecoin assets. The previous Market Insights newsletter tackled Terra’s ecosystem growth in 2021 and how it got to hundreds of decentralized applications from just two at the beginning of last year.
And all of it is grounded on Terra’s stablecoins and the protocol’s ability to maintain the stability of their peg. Yet the key ingredient for such stability is its primary staking asset, LUNA. On the surface, investors got to know LUNA because of its rapid price rise in 2021, but according to the project’s white paper, owning and holding LUNA is meant to represent something entirely more foundational to the stability of the entire network.
Terra is a Tendermint-based blockchain maintained by validators who follow the Tendermint delegated proof-of-stake algorithm and vote on new blocks. Validators run programs called full nodes and are required to stake a certain amount of LUNA tokens to be included in the active validator list, which is made up of 130 validators at the moment. Active validators earn revenue via the transaction fees associated with each block.
Those who prefer not to set up full nodes but want to get a share of the validator’s revenue are called delegators. Delegators are fundamentally stakers who delegate their LUNA tokens to validators in order to increase the weight of staked LUNA. Essentially, LUNA represents the mining power in the Terra network, and the more its economy grows, the more LUNA stakers earn in rewards from fees.
Another critical role of LUNA is maintaining its stablecoin peg. As mentioned, Terra’s
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