Stablecoins are one aspect of cryptocurrency that often go unnoticed. But this is a sector that Terra has been doing great in. There are many stablecoins that are a digital version of the US dollar and are very popular, but Terra has outperformed everyone. In 2021, its token Luna has performed exceptionally well, and so has the project of Terraform labs to support decentralized tokens. This can also be attributed to the great performance of the Luna token that has grown more than 25x in the last 5 months.
What does Terra’s stablecoin have to do with Luna?
All stable coins are pegged to some other coin or something that it derives its value from. This is in order to maintain the value of the coin and keep it stable. For example, a coin pegged to Ethereum could be stable if the market cap of the entire stable coin is less than ETH held. This means if $1 billion worth of stablecoins is released in the market with $2 billion ETH, then a 50% price fluctuation can be compensated, and the price of the stable coin can be kept intact. Here ETH is playing the role of a governance coin on which the stable coin is based.
And in the case of TerraUSD, Luna plays the role of the governance coin. So, the higher the value and a market cap of Luna becomes, the higher the value of a stable coin does. Another reason for the huge growth of Terra’s platform is its two major uses. The first is the Mirror protocols that let’s anyone create real-world assets like stocks and Anchor protocol that is for savings and lending.
Stablecoins are attractive investments
Not everyone wants staggering returns with the risk of volatility. And for them, Stable coins are a good investment. They can hold their value and help users keep the value of their money intact. And the best part is that since they are not very volatile there is peace of mind. And while traditional stable coins are pegged to assets or even a currency, now algorithmic stablecoins are emerging that can use software to keep the value of the money intact.
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