Terra enters the TOP 10 by capitalization and TOP 3 by preferences in DeFi

Terra enters the TOP 10 by capitalization and TOP 3 by preferences in DeFi

Despite the growth of the capitalization of the cryptocurrency market, Bitcoin continues to lose its share, giving way to more practical solutions. By capitalization, Terra, although it entered the TOP 10, has only $26 billion in value against $955 billion Bitcoin. However, the goals of the project are ambitious – to become No. 1 as a means of payment and exchange.

The problem with Bitcoin is not only low bandwidth, but also high price volatility.

For example, it is unsuitable for real estate transactions, because within a few days the price of an object can increase by 1.5 times due to the correction of the cryptocurrency. The same thing happens with the fiat of developing countries only for a slightly longer period of time.

Terra is trying to solve all these problems by creating a supranational currency – Terra SDR, which balances the volatility of the markets. Terra SDR is an analogue of the SDR of an International Fund or a basket of currencies.

But first Terra needs to ensure the integration of the existing financial system with decentralized blockchains. That is, to create an efficient payment system with a high degree of security, instant conversion and low fees. This is implemented through its own stablecoins pegged to the US dollar, euro, South Korean won and even the IMF SDR. Due to the atomic swap, conversions occur without commission at market rates.

To maintain the mechanics in Terra, a floating exchange rate currency is used – LUNA. The coin allows you to reward validators for conducting transactions, and also provides the network with scalability and decentralization. The algorithm for changing the money supply is responsible for the stability of the stablecoin rates. This avoids the risk of increased emissions for selfish purposes, as it was with Ripple, and the outflow of funds in case of exceeding the exchange rate of 1:1, as it was with DAI on the Maker platform.

The uniqueness and practicality of Terra, as well as a good reward for staking with an average annual yield of 7.2%, led the blockchain to the third place in terms of blocked funds, pushing Solana and Avalanche.

Over the past six months, the value of LUNA has soared 8 times, largely due to the increase in the use of a stable coin. Among algorithmic stablecoins, UST came out on top with $8.4 billion capitalization. The development of decentralized applications and the need for “independent” stablecoins suggest that the main growth of LUNA is still ahead.