You've probably read about the devastating LUNA/UST crash Terraform Labs experienced in May 2022 if you keep up with cryptocurrency news. These two cryptos consequently lost practically all of their worth, which led to numerous recommendations from the Terra community regarding what had to be done next.
One idea that was very popular was mass burning. Despite including a public burn address in the same post, Kwon claimed on Twitter that this would not benefit investors. The launch was accompanied by an airdrop in order to stimulate fresh investments.
Do Kwon, CEO of Terraform Labs, ultimately came to the conclusion that a hard fork of the Terra blockchain would be the wisest course of action. This was replaced by Luna 2.0. But what precisely is new about Luna 2.0 and why is it better than its predecessor?
The native coin of the original Terra blockchain is now known as Luna Classic, and the blockchain itself is now known as Terra Classic (LUNC). The new Luna blockchain was developed as a means for Terra and its investors to recover from the severe losses they suffered as a result of the LUNA/UST crisis. Because so many people had suffered financial losses as a result of the crash, TerraLabs decided the best approach to make up for investors' losses was by using a new blockchain and cryptocurrency.
Prior to the crash, holders of LUNA tokens received 35% of the total supply, while UST holders received 10%. Investors that held onto LUNA or UST after the crash will receive an extra 25%. Depending on how much of either token each investor previously owned or currently still holds, they will receive a different amount. The main distinction between Luna and Luna 2.0 is that the latter will not rely on any interaction between an altcoin and a stablecoin. The original Luna cryptocurrency's link with TerraLabs' algorithmic stablecoin, TerraUSD, helped it maintain its value (UST). In this relationship, when the supply or demand of one coin fluctuated excessively, the other coin was either minted or burned.
On paper, this looks like a good idea, however, algorithmic stablecoins are significantly less trustworthy than stablecoins that are often backed by physical assets. This rendered it difficult to maintain the link between LUNA and UST, which led to a significant price decline for both coins. This was coupled with a change to Anchor Protocol's UST savings returns. Luna 2.0 has no reliance on any stablecoin, algorithmic or otherwise, suggesting that TerraLabs has learned its mistake.
Nobody can predict what will occur next. However, for the time being, all we can do is watch and wait to see how Luna 2.0 and Lunc perform in this fiercely competitive and unstable market. Hopefully, investor confidence will return and we will see Luna 2.0 and Lunc gain significant value.
On
KuCoin, you may purchase Luna 2.0 and Lunc.
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www.kucoin.com
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