Bitcoin reaches a new all-time high this week and it still feels like the beginning of what’s to come. Lots of people taking some well-deserved profits from holding through the crypto winter. With most of us expecting those gains to move into the low/mid cap coins over the coming months. One of those coins with the potential to possibly enjoy this process is Terra Protocol.
Introduction
The goal at Terra Protocol is to repair an inefficient payment industry by introducing a more efficient means of payment. Within the current infrastructure, payments from one party to another using different currencies can take up to ten business days for processing. This unnecessary lag has slowed the adoption of digital payments, especially in Southeast Asia where middlemen gouge users and vendors with high fees and take home more than $15 billion dollars a year. Since the value of a currency as a medium of exchange is driven by its network effects, a new digital currency would need to maximize adoption to become useful. Nobody wants to pay with a currency that has the potential to double in value in a few days or wants to be paid in a currency if its value can decrease before the transaction is settled. At the core of how Terra Protocol wants to solve these issues is the idea that a cryptocurrency with an elastic monetary policy would maintain a stable price. Retaining all the censorship resistance of Bitcoin, and making it viable for use in everyday transactions. Terra Protocol wants to offer strong incentives for users to join the network with an efficient fiscal spending regime, managed by a Treasury, where many stimulus programs compete for financing. One where proposals from community participants will be vetted by the rest of the ecosystem, and when approved, financed with the goal to increase adoption and expand its potential use cases.
Built using the Cosmos SDK and Tendermint (PoS) consensus algorithm. Creating self-regulating stablecoins TerraUSD and TerraKRW, these are collateralized by an additional native token called LUNA. Terra has a proof-of-stake ecosystem, where Luna is the staking coin. To stabilize the price of Terra, Luna acts as a counterparty to anyone looking to swap Terra and Luna at Terra’s target exchange rate. Giving users the ability to swap TerraKRW for TerraUSD at the effective KRW/USD exchange rate. This also allows all Terra currencies to share liquidity. Recognizing strong regionalism in money, Terra aims to be a family of cryptocurrencies that are each pegged to the world’s major currencies. The protocol intends to issue Terra currencies pegged to USD, EUR, CNY, JPY, GBP, KRW, and the IMF SDR. Over time, more currencies will be added to the list by user voting. With the importance of Terra currencies to have access to shared liquidity. The system will support atomic swaps among Terra currencies at their market exchange rates. All Terra transactions pay a small fee to miners. With fees defaulting to 0.1% and capped at 1%. Meaning that transacting with Terra in e-commerce will be much cheaper than transacting with traditional payment options like credit cards.
With many markets available, the system must rely on decentralized price oracles to estimate the true exchange rate. Once the system has detected that the price of a Terra currency has deviated from its peg, it must apply pressures to normalize…
