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Tokens in Terra's ecosystem are represented by two token types: a family of Terra stablecoins and Luna.
LUNA represents the mining power of the network of Terra stablecoins. The Terra Protocol runs on a delegated Proof of Stake (PoS) blockchain, where miners need to stake a native cryptocurrency Luna to mine Terra transactions.
The family of Terra stablecoins are each pegged to the world’s major currencies. The protocol issues 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.
Terra Core facilitates the creation of many fiat-pegged currencies, facilitated by Luna the staking token. The genesis issuance of Luna is 1 billion, with initial allocations broken down in accordance with the following:
Terraform Labs (10%): Used to facilitate the research & development of the Terra Project. can be found in the accounts/terraform-labs directory. Terraform Labs also holds an additional 4.5% of the LUNA supply on behalf of investors who did not clear KYC in time for their token sale, and thus manually claim tokens for Terraform Labs rather than having their tokens programmatically vest from the genesis block.
Employees & Contributor Pool (20%): Used to compensate employees and contributors of the project. Some part of the coins have already been granted, and can be found in the accounts/employees directory. Currently 4.7% of this pool has been granted.
Terra Alliance (20%): The Terra Alliance is key to driving early adoption and usage for Terra. We will be using this pool to set incentives, mainly marketing discount programs (such as coupons for users) and volume incentives for alliance partners. Terraform Labs will be playing custodian for this pool, taking input from the community to best allocate resources from this pool.
Stability Reserves (20%): Bootstrapping stablecoins is no easy feat, with threats to the peg coming from every adversarial angle. Stability reserves will be to manage the network's early stability close to genesis.
Genesis liquidity (4%): 4% of Luna will be made available to the market close to genesis to allow everyday users to use and interact with it.
In order to finance the development of the Terra Project, Terraform Labs held three token sales:
Terra also minted 1 billion SDT (SDR stablecoin) at genesis. This SDT reserve exists to augment Terra's stability mechanism. Core to Terra's stability mechanism is the swapping of stablecoins to Luna - and while this is effective in normal conditions, when there is large changes in stablecoin demand in either direction the cost for the swap increases significantly: swap fees increase quadratically as one side of the fee is favored (and normalizes back over time), so in times of rapid demand change the fee goes up significantly, which makes it difficult to accommodate payment operations requiring a very tight spread. During times like this Terraform Labs swaps SDT to KRT and sells that for KRW to Chai. When Chai merchants settle out, Terraform Labs maintains that KRW in a fiat reserve to buy back KRT.