Today, we launched the Terra Community Console, a new interactive platform for users to dive deeper into Terra’s blockchain data. With DeFi and cryptocurrency markets moving so rapidly, we found it important for users to be able to examine what is happening on-chain, in real time. Anyone can access it for free at terra.flipsidecrypto.com.
What Is Terra?
Terra is a blockchain platform with a suite of stablecoins that are each pegged to different fiat currencies. The current stablecoins in the Community Console are the UST (US Dollar), KRT (Korean Won), and SDT (IMF SDR-pegged). The LUNA token is the staking token that serves as collateral for these stablecoins. As such, it powers the Terra blockchain’s delegated proof of stake system, ensuring stability and security of the network.
Looking at Terra’s on-chain data, 5 key metrics stand out as clear indicators of LUNA’s strong potential for growth.
1. Transaction Count: LUNA transactions quadrupled in the past 90 days.
The transaction count for LUNA tokens is increasing rapidly in correlation with the increasing number of stablecoin transactions taking place on the Terra blockchain. This is because every Terra stablecoin transaction charges a small transaction fee, which is paid to LUNA stakers. From an economic standpoint, increasing LUNA transactions and LUNA rewards signals broader adoption of Terra stablecoins.
LUNA is the reserve currency of the Terra stablecoin ecosystem. It has two core functions:
1) To provide incentives for the platform’s validators.
2) To ensure the price stability of Terra stablecoins. When high demand causes stablecoin prices to shift above their peg, Terra will sell that specific stablecoin in exchange for LUNA. Vice versa, if low demand is putting downward pressure on the currency – Terra will buy stablecoins from the market using LUNA. In this way, LUNA stakers absorb the short-term volatility of the network
2. Number of Accounts: 2K New Accounts Are Created Daily
With over 2.2 million accounts and on average 2,000 new accounts added daily, the Terra stablecoins are rapidly gaining traction. On-chain data reveals an average of 63,000 active accounts per day, a key metric that is also growing considerably.
In particular, the launch of Mirror, a synthetic asset protocol built on Terra expands the adoption of UST by requiring UST to mint and swap mAssets on the Terra side, and to swap mAssets listed on Uniswap for its bridge to Ethereum. So far, Mirror has accumulated more than $90 million worth of UST collateralizing assets.
3. Cash flows: $26K are Collected Daily from Transaction Fees
Average daily reward cash flows stand at $26K at the time of writing – most of which come from KRT transactions.
The breakdown of fees collected per asset shows that KRT transactions are accumulating 26 MM KRT (1KRT = 0.0008 USD) on average daily since December 12th, 2020. Behind it is UST, which brought in 1,000 UST (equivalent to USD 1,000) daily.
These fees are paid back to LUNA stakers who, on average, are making 9.57% APY (view next metric). The LUNA token should keep gaining value due to the increasing demand and usage of Terra stablecoins. Additionally, LUNA has no inflation, so when the adoption of Terra’s stablecoins increases, transaction volumes move upwards, and increasing LUNA rewards. Consequently, LUNA becomes scarcer as more Terra stablecoins are printed to meet demand since minting on Terra requires burning a stablecoin or a unit of LUNA.
4. Staking Returns: LUNA Stakers Are Making 9.57% Annually
Staking returns — currently at 9.57% annually — are a lot higher than any bank’s savings account could offer. And while they are not as high as what DeFi liquidity providers offer, Terra also presents lower risk of users looking to place their money. Since LUNA also has no inflation, the LUNA rewards accrued by stakers are not prone to the same inflationary pressures of other PoS blockchains that rely on emission rates for staking rewards.
With Terra’s upcoming product Anchor, high, low-volatility yields will be available to holders of UST, increasing the demand for UST and driving up the staking rewards for LUNA holders.
The Terra Station Wallet is also very easy to use.
5. Velocity: UST Consumer Activity is on the Rise
Velocity is the frequency with which a stablecoin is used for consumer activity, as opposed to investment and trading activity. The velocity of UST surged in the beginning of December, and has steadily increased since. This is likely a function of the influx of capital to UST for accessing mAssets on Mirror in December, followed by the whitelisting of UST on several DeFi protocols on Ethereum, including Balancer and Curve.
6. LUNA Withdrawals from Exchanges are on the Rise
LUNA withdrawals from exchanges signals positive market sentiment about LUNA’s long-term value. For example, reduced exchange balances are indicative of a lowered propensity to trade LUNA speculatively in the short-term. LUNA tokens not on exchanges can be staked or used to mint Terra stablecoins. This manifests itself as a progressively larger community of long-term “hodlers” of LUNA, which has the consequence of reducing overall sell pressure on the token. Such a correlation was aptly demonstrated by BTC before its major bull run in the last several months, when exchange reserve values plummeted, where they still remain muted compared to the 2017 bull run.