Luna Terra - Overview and Investment Thesis

by MianBao,

This is intended as a layman’s introduction to Luna and the Terra Network for 10 Bagger Club members.

We want to recognise the enormous contribution made to the 10 Bagger Club group in the crypto channels by TonyM of Hegemony Finance. Much of the information, including price forecasts outlined here, are derived from TonyM’s expert knowledge running a leading blockchain consulting and trading business. Many 10 Bagger Club members have had direct experience learning from TonyM and are very grateful.

The Basics

Terra’s focus is on minting or issuing country based stablecoins (blockchain tokens pegged to a real-world currency like the USD) and has established 18 so far. Terra earns revenue whenever its stablecoins are used in any kind of transaction. In less than 12 months the Terra’s UST stablecoin has become one of the leading stablecoins with a market cap of $1.6 billion. Stablecoins such as Terra is the currency that forms the foundation of the DeFi world.

While DeFi apps native to the Terra ecosystem already use Terra’s stablecoins and form a very large use case of support, other DeFi apps on other blockchains such as Etherium’s, Binance, Solana, and Polkadot can all use Terra’s stablecoins. This is known as interoperability and uniquely built into the foundation of Terra.

So where is Luna in all this? Luna is at the centre of the Terra ecosystem and has a role somewhat like a reserve currency. Its main function is to stabilise or maintain the peg for all Terra’s stablecoins. Luna is the coin that represents the overall performance of the Terra network. Luna is of course also tradable on seven major blockchain exchanges including Binance, Huobi, Bittrex, and Kucoin with more to come.

The investment case for buying Luna right now should focus on the following catalysts:

Staking Rewards are important to the Luna investment thesis. After you purchase Luna you can stake or pledge them to the Luna liquidity pool and receive rewards in the form of new Luna and other Terra stablecoins. On the one hand stakers receive a small share of the transaction fees earned by the whole Terra ecosystem. Currently, this is a rate of about 4.5% APR. Another kind of reward is called an Airdrop and these are rewards given to stakers by apps in the Terra ecosystem. At present, there are only 2 major apps - Mirror: synthetic asset trading and Anchor: loans - that provide these rewards to stakers. Airdrops are exciting.

As new apps go live in the coming months Airdrops will be accrued by Luna stakers in much greater volume. The combined airdrops from the 19-20 new apps launching in the next couple of months are expected to bring an additional 30% income to Luna stakers. This will go even higher later in the year as other apps launch and stakers could potentially see an additional 50-80% return on their staked Luna. While these returns will not be earned indefinitely, Luna stakers could be looking at almost doubling their investment over a 12 month period before even considering the forecast price appreciation of Luna. The longer term rewards for staking Luna are expected to settle down to about 14+% APR.

The price of Luna has been trading in the $6-7 range recently. The consensus forecast price range for Luna by the end of 2021 is $25 - $45.

However we believe that the impact of the explosive growth drivers described above will result in:

There is a strong case for Luna not only as a 10 bagger but even a 20 bagger in the next 12-24 months at current prices.

We recommend watching this YouTube before continuing:

Overview - Key Points

This may get a little technical but hang in there!

How The Terra DeFi Ecosystem Is Changing The Game - DeFi or Decentralised Finance Explained

What Is A Stablecoin?

Watch these 1-2 minute YouTube videos before reading on.

What Are Terra Stablecoins?

What Is The Luna Token?

Staking

These short articles also describe Terra Luna; a little technical but worth it:

These links will help you get set up for Staking Rewards with your Luna:

Overview - Expanded

What is Terra?

Terra is an up-and-coming blockchain powerhouse, founded by Do Kwon and Daniel Shin, which has amassed a $7.8 billion market cap on its reserve currency asset - Luna - in under three years since its creation. The exchange-traded current market cap of Terra LUNA is over $2.5 billion at the currently low price of $6 per Luna.

When you hold Luna you are part of the broad and rapidly expanding Terra DeFi Ecosystem. It aims to become the most leading and most comprehensive DeFi concept platform by methodically building out a full range of DeFi applications or Dapps based around its stablecoins. On offer are financial services paralleling those of our real world financial system with blockchain equivalents representing currency, loans, stocks, interest, transaction settlements, etc.

(Terra Dapps and ecosystem partnerships listed here https://docs.terra.money/ecosystem.html#terra-website-and-socials ) With Terra, you can earn interest on its stablecoins, spend these crypto currencies easily with merchants, and replace most of your banking needs with one seamless DeFi experience. A real-world user won’t have to understand or deal with wallet addresses, cross chain swaps, and other crypto concepts but rather will access a full range of decentralised banking services from a very simple online interface. Over time, Terra aims to pave over banks, credit networks, and payment systems like PayPal with one uninterrupted and rewarding blockchain experience.

Luna is the first stablecoin with Visa and Mastercard master merchant licences (allowing it to issue consumer debit cards from a decentralized bank), tradeable synthetic stocks and assets, and savings accounts earning 20% interest. From its base in S.Korea, it is actively launching in 15 other countries right now.

Most people thinking about investing in blockchain space say they would jump in if they could find one that had real-world applications and a strong use case. This is Terra Luna.

Moreover, unlike almost all other blockchain concepts, the Terra team decided to build the front end, real-world use case, first and then put their energy into the blockchain back end. This has already been achieved and proven itself. As of today the UST has a $1.6b market cap and is the fifth largest stablecoin in issuance. The UST is used in various countries and has over 30 apps running on it already for various forms of e-commerce. And this is continuing to increase. As one example, the CHAI payments system for Korean consumers already has 2.5 million users and is growing rapidly.

To summarise, Terra Luna is a one-stop blockchain shop and aims to provide decentralized, desirable, necessary, and affordable financial products to everyone, from a single blockchain ecosystem that is interoperable with other major blockchains.

Maps of the Terra Ecosystem are below and a clever interactive map can be viewed on the link below if you want to drill down into the various Dapps: https://www.learn-terra.com/map

Anchor Mirror App

What is Luna?

How Does The Terra Luna Ecosystem Work?

At its (monetary) heart the Terra model is essentially a Dual Coin ecosystem with the UST (a stablecoin) on one side and Luna on the other. To keep UST stable, meaning pegged to USD (vital to consumers using Terra applications like buying movie tickets or taking out a loan), Luna adjusts up or down (unlike other stablecoins that need real $ to back them up). The basic mechanics of the UST/Luna dual-coin concept can be seen here:

To attract people to hold Luna for this purpose, namely supporting the peg of its stablecoins and accepting the price fluctuations of Luna as it keeps the UST stable, Terra has created all kinds of incentives or rewards. Staking is one of these. Airdrops are another. These allow you to accrue additional amounts of Luna. Nice, right? In fact the whole Terra ecosystem is designed to incentivize both participation and rapid organic growth of the entire system.

As an investor in Luna, a key point to note is that the total supply of Luna coins out there is designed to decrease over time. And all Increased use of Terra’s stablecoins across any and all parts of the Terra ecosystem (including use in other blockchains through interoperability) drive this. In turn as fewer Luna exist, the Luna that remains will increase in value. We like this a lot! There will of course always be enough Luna to go around in the future but at some point few people will have a whole Luna, rather they will have a fraction of a Luna, such as 0.00546 Luna for example.

How Big is Luna / Terra and Is It Undervalued? Yes!

The most popular metric for DeFi is the TVL (Total Value Locked) metric. TVL represents the total amount of assets secured in the various DeFi applications and smart contracts and identifies how much capital is actually in “use” across an entire DeFi ecosystem.

TVL Explained: TVL and measuring DeFi value explained

As a comparison, the $2.37 + billion TVL of Terra is more than the combined value of some of its peers: $SOL, $AVAX, $ONT, $NEO, $FTM & $ZIL. On the other hand, Luna still has a market cap of about 1/10 of these other blockchains. Terra’s expanding range of DeFi apps is quickly going to attract a lot more capital into its ecosystem.

Images

What Has Been Going On With The Price of Luna Recently?

Luna has dropped from its USD $20 highs last month to the $6-7 range in the past couple of weeks. Obviously most crypto currencies have gone down recently with BTC and ETH leading the way.

That said, Luna and the UST stablecoin have proven that they can withstand a series of shocks to the system. In fact, the price instability of Luna has acted precisely as intended in its dual-coin role stabilizing the UST and maintaining its USD peg. So understanding a little about the mechanics of Luna as outlined above is important to understanding the reasons for price fluctuations in Luna. Luna is designed to absorb instability and has done just that.

There were other factors at play that impacted the volatility Luna experienced recently, including the shakeout of over-leveraged speculator positions, but this has arguably been a good thing for the system.

There are several upcoming initiatives about to be rolled out within the Terra ecosystem that are expected to go a long way to reducing future volatility in the system. The upcoming launch and impact of Columbus 5 is one of the most important and exciting initiatives.

Where Is The Price of Luna Going?

Luna began to get attention over the past year as it skyrocketed into the top 20 coins by market cap. For those who don’t know, Luna was trading at $0.50 back in December 2020 and $0.83 as late as the end of January 2021. Since then it has gone on a meteoric rise, tapping $22 before pulling back and consolidating in the $18-19 range.

Needless to say Luna was impacted by the recent black swan event that impacted the whole crypto sector. Since then, over the past week or two Luna has been fluctuating over around the $6 - $7 mark. For those who understand what Terra / Luna is setting out to do and want to be part of it, the current price of Luna is a rare entry point and buying opportunity. However buying in anywhere under $15 could be considered good buying territory.

Why? With the ongoing rollout of new DeFi services and expanding Terra ecosystem there is a strong case for Luna reaching $100 by the end of this year. The next three months and the roll out of Columbus 5 and another 85+ new DeFi apps connected to Terra will drive this.

Terra recently announced plans to integrate large-scale cross-chain interoperability with Bittrex Global, and Ethereum and Solana are not far behind. This follows the surge in demand for stablecoins as their utility increases globally. Furthermore, Terra’s innovative dual-coin model is designed to be robust enough to help other blockchain ecosystems scale using TerraUSD. While 2021 should be a strong year for the price of Luna, 2022 could well be an even bigger growth story on the back of this year if Terra checks all its boxes in its DeFi rollout. To date the Terra team have proved that they can methodically build out the blocks that make up their DeFi ecosystem and it should continue to do so with increasing speed.

As the leading decentralised stablecoin and third largest layer one blockchain by TVL, with an established real-world use case and a rapidly expanding DeFi ecosystem, Luna is as strong buy under $10 and should be a 10 Bagger by year end.

Hope this is helpful. Brad @MianBao

Core Assets and Apps Within The Terra Ecosystem

MIR - Mirror Protocol’s governance token

ANC - Anchor Protocol’s governance token

LUNA - Terra’s reserve asset / Governance tokenluna

UST/KRT/MNT - Terra stablecoins, soft-pegged to fiat currencies (1 UST ≈ $1 / 1 KRT ≈ ₩ 1)

CHAI - Consumer payments platform

These are outlined in fairly easy to understand language in the links below. Recommended reading:

Terra Ecosystem Overview: A Guid For Newcomes

Terra for Dummies

Early Investors in Terra Luna

Terraform Labs had 12 investors in its $32 million seed round in August 2019, led by Binance Labs, Dunamu, Huobi Capital, OKEx. Kakao Ventures, HashKey Capital, and LuneX Ventures funded Terraform Labs across the 2019 undisclosed funding rounds. In the latest January 2021 funding, Terraform Labs raised an additional $25 million from Pantera Capital, Coinbase Ventures, Galaxy Digital. Many notable VC crypto funds have invested in Terraform Labs.

Terra Exosystem Overview: A Guide for Newcomes

What Is Luna and How To Stake It

ANCHOR app

Borrowing

Anchor Mirror App

Mirror App

Synthetic stocks and assets

Anchor Mirror App