Advantages and disadvantages of Terra (LUNA)

Terra (LUNA) is a blockchain project whose object is to create a stablecoin that can be used globally in the electronic market. This platform has built an ecosystem that allows the generation of DeFi applications on a high-speed blockchain. The platform therefore offers two types of currency, one is its native token LUNA and the other the stablecoin UST, equivalent to the Dollar, it is worth saying that there are more stablecoins but UST is the main one and the currency created by Terra’s own blockchain.

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Advantages and Disadvantages of Terra (LUNA)

The network uses the Delegated-Proof-of-Stake (DPoS) method as its consensus protocol. The algorithm for consensus uses about 100 validator nodes, so it can be deduced that the standards to be a validator node are very high. However, any user can perform staking through the Terra Station platform, where the user selects the validators, making the user a delegator. It is worth mentioning that the staking is subject to a blocking time of 21 days, once this time is over the reward is received.

The following is a brief explanation of the operation of the platform and its currency stabilizing system.  For the creation of UST an equivalent amount of LUNA must be burned, this method is specific to Terra since other currencies just collateralize the loan (the creation). The process of burning LUNA to UST is reversible, i.e. you can convert UST to LUNA.

The TERRA ecosystem includes some protocols that may be interesting. We start with Mirror, it is a protocol that allows to create synthetic tokens having UST as a collateral asset, they serve to follow the price of financial market shares (generally they are pickled over-collateralized). on the other hand there is Anchor, another Defi innovative protocol in which we can deposit assets and get a fixed rate of return.

One of the most characteristic elements of the network is the system called Seignorage. This system incentivizes the burning of coins for coin stabilization. For example, if the LUNA moon had a value higher than the UST, the platform would offer an even higher exchange rate in UST, for which UST would have to be burned. Thus, when entering more UST, it is adjusted with the value of USD. The same process will occur in the reverse process, if UST is worth more than LUNA.

The network has a democratized governance mode depending on the amount of LUNA owned, this portal is accessible from Terra Station. This is where the future of the projects are decided as well as the destination of the LUNA from the platform’s treasury.

Advantages of Oasis Terra (LUNA):

  • Access to rewards, thanks to the DPoS protocol
  • Stable currency, introduces asset burning protocols to prevent inflation
  • Democratic governance system, LUNA owners can be an active part of the future of the project with their votes.
  • Attractive ecosystem, much of the success of the blockchain is because of the number of projects it is capable of attracting.

Disadvantages Oasis Terra (LUNA):

  • Not very decentralized,due to the small number of validator nodes, 100.
  • Bonding, in Staking the asset is blocked for 21 days for the collection of the reward.
  • Low cashout commissions, the rewards are quite low for staking.