Terra Classic (LUNC) is a cryptocurrency created as a result of the hard fork of the Terra LUNA blockchain into two separate chains: LUNA Classic and Terra. LUNA Classic is the original Terra LUNA chain, while Terra is the new chain (also known as LUNA 2.0). The hard fork was implemented by Kwon as a recovery plan following the collapse of UST/Luna and the establishment of a new Terra chain.
- Terra Classic is a decentralized stablecoin platform built on the Cosmos Network.
- LUNC (Previously LUNA) is the native token of the Terra blockchain whose main function was to absorb the price deviation of UST – the platform’s algorithmic stablecon.
- Followed by the UST stablecoin collapse, LUNC lost 99% of its market value.
- The original Terra blockchain and LUNA coin, now known as Terra Classic and LUNC, continue to exist and are managed and operated by their own community.
LUNA Classic (LUNC) refers to the old version of the Terra protocol designed to support stablecoin developers in building DeFi projects on the Terra blockchain, with Terra and LUNA as the two primary cryptocurrencies. Terra seeks to provide a stable and scalable blockchain platform for decentralized applications and financial services.
Luna Classic (LUNC) Token
Luna Classic (LUNC) is Terra blockchain’s first native token, released in August 2018. Its main function was to absorb the price deviation of the algorithmic stablecoin, UST.
UST’s purpose was maintaining a fixed value relative to the USD by adjusting the coin’s supply through minting and burning. However, in May 2022, UST lost its peg and collapsed, leading to a hyperinflationary spiral creating which trillions of LUNA tokens and dropping the value of the original LUNA token by 99%.
Terra Classic (LUNA/LUNC) Crash
During the period from May 9th to May 12th, LUNA price plummeted by 99.98%, falling from around $64 to just $0.0087. The crash led the LFG – Luna Foundation Guard to announce that a hard fork would be implemented, creating a new blockchain called Terra and also a new version of the LUNA coin with the ticker LUNA2.
However, the plans later altered when they announced a completely new blockchain. The original blockchain renamed itself to Terra Classic. UST rebranded to USTC and had a redesign to be collateral-backed rather than algorithmically-backed.
New Terra blockchain’s minted its first block on May 28th. Since then, the former LUNA became LUNC, a crypto coin managed by its community.
Terra Classic’s Role on UST Collapse
Terra Classic’s role was crucial to UST. LUNA, the native token of Terra Classic (now renamed to LUNC), tied to the durability of UST as a stablecoin. When UST demand increased, they burned LUNA. However, if UST was unstable, it would negatively impact LUNA’s value, since its supply increased in order to decrease the UST supply to maintain the peg. Chaos unfolded in May 2022, when a series of liquidations and bank runs caused UST Classic to depreciate to as low as $0.044 and resulted in an astonishing 99% crash of Terra Classic from over $80. UST Classic was unable to recover its peg.
Terra Classic Development
Founded in 2018, Terra wanted to increase cryptocurrency adoption of by creating price-stable coins pegged to major fiat currencies. Terra Alliance supported the development of the project. The alliance consisted of 15 Asian e-commerce companies with a combined annual transaction volume of $25 billion and 45 million users.
Co-founders Daniel Shin and Do Kwon conceived Terra’s concept. They saw the need for price stability in order to increase the use of crypto and blockchain technology. Shin, with his experience in building a major e-commerce platform in Asia, identified the limitations of current payment networks. Kwon, a former founder of a dApp, explained how Terra could address these issues and create a new money form.
Terra Classic FAQ
What is the difference between Terra Classic (LUNC) and Terra (LUNA)?
The implementation of the Terra Ecosystem Revival Plan 2 has led to the creation of two versions of the token, with both versions having the right to exist. The plan involves splitting the current Terra network through forking, resulting in a new chain in the ecosystem while preserving the previous version. As per the recovery plan, the existing chain and token renamed to Terra Classic. The new LUNA tokens got distributed to LUNA holders and UST holders prior to the depeg and subsequent crash.
However, LUNA 2.0 does not include any Terra stablecoins. Despite this, some supporters do oppose the restoration plan and the new chain, which could potentially lead to a decline in the classic community. In an effort to increase individual token prices, the classic community has agreed to start burning as many LUNC tokens as possible to reduce the coin supply.
Why did Terra Classic (LUNC) crash?
On May 9, 2022, UST experienced a significant drop in value, falling from its usual $1 price to a low of $0.68. The cause of this were the rapid UST withdrawals from the Curve pool in favor of other stablecoins. On top of that, there was a short selling of LUNA, which put downward pressure on the price of LUNA, the collateral for UST.
In an effort to stabilize UST, Terra began minting more LUNA. Unfortunately, this only served to further dilute its value and did not restore the peg. Even the sale of $1.5 billion worth of BTC from Terra’s treasury was not enough to restore confidence in UST. Similar to a bank run, UST holders preferred to sell their UST for pennies rather than redeem it for LUNA.
Who Are the Founders of Terra Classic (LUNC)?
Do Kwon and Daniel Shin founded the now called Terra Classic in 2018. Terra’s goal was to promote the widespread adoption of blockchain and crypto by focusing on price stability and ease of use.
Shin also co-founded Ticket Monster, a South Korean e-commerce platform, and Fast Track Asia, a startup incubator.
Kwon on the other hand serves as CEO of Terraform Labs which is the company behind Terra. He previously worked as an engineer for Microsoft and Apple.
What is the circulating supply of Terra Classic (LUNC)?
At the time of writing (January 2023), Terra Classic has a circulating supply of around 6 Trillion LUNC with a market cap of around ~$900 million. The coin has fallen 99% from its highest price on April 05th, 2022.
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