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The digital asset ecosystem known as Terra, which was once worth $40 billion, was destroyed in May 2022 in what is thought to have been the most significant loss of value for a token in the history of cryptocurrency.
Within a week, the price of UST and its twin token, LUNA, which was designed to keep UST’s price stable, plummeted almost all the way to zero.
UST was once the most widely used algorithmic stablecoin. Before the market crash, both UST and LUNA were among the top 10 most valuable cryptocurrencies. During the chaos, the Terra blockchain had to be stopped in two separate instances.
Do Kwon, the founder of Terra blockchain developer firm Terraform Labs, is leading the charge to try to bring the project back to life. A portion of the community has made the decision to remain and concentrate on how to bring back the project.
Because of this, there are now two blockchains for Terra that are running in parallel:
- The traditional (first) iteration of the Terra network, with the token now known as Terra Classic (LUNC) and UST tokens.
- A brand-new blockchain that just went live, with its own native token known as luna (LUNA).
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The second iteration of the Terra blockchain, known as Terra 2, went live in May 2022.
Parallel to this, the previous blockchain, which is commonly referred to as “Terra Classic,” continued to be active despite the fact that there was very little to no activity on it, and there were no plans to develop it. The operation of the previous blockchain was preserved, and the corresponding token was renamed Terra Luna Classic (LUNC).
Launched in 2018, Luna Classic (LUNC) was initially developed with the intention of serving as the first native token for the Terra blockchain and was given the name LUNA.
It was designed to act as a twin token with the purpose of compensating for any price fluctuations that might occur with the blockchain’s algorithmic stablecoin, terraUSD (UST). UST was designed to maintain a price parity with the United States Dollar (USD) by creating and destroying UST tokens in order to maintain a supply-and-demand equilibrium at a $1 price peg.
The utility token experienced a hyperinflationary spiral after the UST lost its dollar peg and collapsed in May 2022. This was due to the fact that the algorithm that was intended to back up the UST created trillions of tokens, thereby reducing its value by almost one hundred percent.
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FAQs
Are luna and luna classic risky?
At this juncture, investing in either Luna Classic (LUNC) or Luna (LUNA) is considered to be extremely high risk.
It is the same as buying a house that has been reduced to ashes or, alternatively, putting money down on plans that do not even exist outside of ideas shared on the internet.
