Yield Farming On DeFi Luna

By Evan Moffic

In 2016, after five years at Microsoft, a bored computer science graduate of Stanford University started his first company. It aimed to expand internet access to impoverished populations around the world.

As the company grew, its founder, Do Kwon, became so intrigued by the technology that he began another company focused on it. That company was called Terra Form Labs (TFL).

The initial goal of TFL was to use the blockchain to develop more efficient payment systems. Several companies in his native South Korea signed up to try it.

Instead of relying on big companies charging a set fee, TFL allowed companies to manage transaction using a decentralized network

The network runs on stable coins, a type of cryptocurrency pegged to a fiat currency. The primary stable coin is UST, in which one UST is equivalent to one US dollar.

UST is also paired with another currency called Luna, whose value increases as more UST is adopted around the world.

So what?

Three critical factors have distinguished TFL from other cryptocurrency projects. The first was the stable coin UST. It derives its value from trading protocols, not reserves.

The protocol is that one Luna is burned for every UST minted. This protocol makes UST truly decentralized. It does not depend on fiat currency reserves to maintain its peg to fiat currency.

The second key difference is its usefulness.

A merchant who is part of Terra Luna’s network does not need to understand the technology. He or she can use a Terra-affiliated credit card processor and receive payments in the same as any other merchant.

But behind the scenes, a difference process will unfold, and the merchant’s processing fees will be about .5% rather than 2-3%!

The third difference is the speed and usability. Terrais a layer-one blockchain, like Bitcoin and Ethereum. But unlike Bitcoin, it can handle thousands of transactions in seconds rather than ten-minute intervals.

And unlike Ethereum, it does not exorbitant transaction fees that can make small transactions less feasible.

This speed and usability have made Terra the foundation of a rapidly growing array of banking, trading, artistic, and even real estate related projects.

One project, called Anchor, allows users to deposit UST and receive almost 20% annual interest! It has quickly attracted tens of thousands of users. You can even purchase insurance on this yield.

Another protocol called Mirror allows users to trade derivatives of individual stocks and index funds.

A user in Thailand, for example, could buy mTesla, which is a synthetic share of Tesla through the mirror protocol. They would then profit if Tesla stock goes up or lose if it goes down.

This protocol opens up the US equity markets to people who do not have ability or resources to enter it in the traditional way.

Over the last year adoption of the UST stable coin reached went from under one billion to more than 10 billion dollars. As a result, the Luna token increased in value from under $1 to an all-time-high of $100. If decentralized finance continues to grow, Terra Luna is a project to watch.

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