How Does Terra Work?

how does terra work this is one terra u.s dollar or ust for short it's a currency built on terra's blockchain the price of one ust is determined by how many people want it and by how much ust is available let's imagine the entire terror economy as a pool size of the pool is determined by the total supply of ust if more people want ust the tide rises and if less people want ust the tide falls the height of the pool represents the value of each ust if you can do more with ust like buy coffee or invest in stocks more people will want to buy ust driving up its price to bring back the water level to one dollar we can expand the pool by introducing a new supply of ust but where does new ust come from at terra we've designed a machine that swaps one dollar worth of luna to one ust investors who predict ust will be more useful and used in the future can buy and hold lunar when the value of ust rises above one dollar any lunar holder can swap one dollar worth of luna for one ust and sell each ust for more than a dollar making a profit the newly introduced ust expands the pool bringing its price back to the one dollar peg now luna is more scarce and therefore more valuable during times of contraction any ust holder can profit by swapping ust for luna raising the price of one ust back to one u.s dollar as ust becomes more useful in the long run luna holders are rewarded for assuming the risk of short-term price volatility so how exactly does the machine work when luna is swapped for ust a certain percentage is burned and the rest piles up in a community pool from the other end new ust is printed this process is called signorege as more applications are built using ust massive demand will cause price to deviate above the one dollar peg meaning we need more luna swapped for ust to expand supply meanwhile luna becomes more and more valuable and the community pool accumulates more funds the funds in the community pool are reinvested to build more apps that use ust and the virtuous cycle of growth continues investors who hold luna see its value rise during times of expansion and if they choose to stake earn transaction fees on ust even when demand for ust is low tera's algorithm automatically increases fees so that validators are always rewarded with a steady cash flow of ust with lunar you can do so much more than earn passive income lunar holders can participate in terror's governance process proposing or voting for changes in transaction fees senior edge allocation tax rate and many more luna not only collateralizes ust but also many more world currencies like korean one and the imf sdr on the terra blockchain much like the moon which stabilizes the earth's rotation luna and its stakers are essential to terror's stability join us on our mission to create a truly open and transparent monetary platform that no one controls setting money free for billions worldwide

Channel: Terra

Views: 160,996

Rating: 4.9185963 out of 5

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Id: KqpGMoYZMhY

Length: 3min 37sec (217 seconds)

Published: Wed Oct 21 2020