The past couple of weeks has been particularly turbulent in the cryptocurrency ecosystem, filled with massive volatility across the board. Amid the established market leaders in the face of Bitcoin and Ethereum chart mild gains, Terra Classic’s native coin – LUNC – is up by a massive 200%. However, the entire Terra ecosystem, including the classic chain and the new one, went through massive volatility recently, so let’s explore see why.
WHAT IS TERRA CLASSIC?
Before we examine the reason for LUNC’s unprecedented surge, it’s important to know what Terra Classic is. Earlier this year, the Terra ecosystem faced major issues associated with the peg of its algorithmic stablecoin – UST. The latter lost its dollar parity and while this might be fatal for centralized stablecoins, it was the final straw that broke UST’s back.
This is because of the way the system was designed to work. A burning mechanism allowed investors to buy LUNA tokens and redeem them for UST at a premium that was active as long as UST was trading below a dollar. This arbitrage worked just fine until there was liquidity and this became the cause of the crash of the entire Terra ecosystem. Billions were wiped off the market board and many users were left with devastating losses running up to millions of dollars.
In an attempt to rebuild the ecosystem, Terra founder – Do Kwon – came up with a plan that included a chain split. On 16th May 2022, he proposed the fork of the Terra chain, creating two networks in the process. The first one would be the new version called Terra and it’s native token carries the original LUNA ticker. The second one would become today’s Terra Classic and its native token would carry the LUNC ticker. Both chains coexist but have developers who work on them independently.
WHY IS LUNC PRICE UP BY 200% IN JUST TWO WEEKS
Fast forward a couple of months and members of the Terra Classic community are working hard, proposing various mechanisms and features that are designed to advance the growth of the Terra ecosystem. On 27th August 2022, a new staking service went live on the Classic chain and the cryptocurrency has been soaring ever since the staking service was announced. This is the singular feature that is responsible for the surge of LUNC’s price.
In addition to this, Edward Kim, a Terra community member, had proposed a tax-and-burn mechanism that would see a 1.2% tax and burn on all LUNC transactions earlier in August. This could mean that we have not seen the end of the LUNC price rise as things could get interesting real soon.
At the time of this writing, LUNC is trading at $0.000383, up by more than 200% in the past two weeks, according to CoinGecko’s data. Staking a is fairly simple feature; Users can receive yield for staking their LUNC with different network validators. Currently, data from StakingRewards shows that the current yield is almost 38%, while running a LUNC validator node yields 42%.
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