COINHOT – The prices of Terra USD (UST) Stablecoin and Luna cryptocurrencies have been steadily declining recently.
Even Terraform Labs, the company that originally offered cryptocurrency, stopped new trades twice in 24 hours.
Terraform Labs said in a company tweet on Twitter that auditors or agencies with the authority to verify transactions on the blockchain have decided to “plan to reorganize” the Terra network.
“Blockchain Terra has been officially discontinued on block 7607789. Validator Terra has taken down the network to reset its plans. Looking forward to the next update.” the company wrote the handle terra_money on Twitter.
The company also provided information via Discord, saying “Among the auditors, the quorum is trying to shut down the network to avoid a DECIMAL crisis caused by Luna’s exponential depreciation,” Validator Terra said before closing the deal. .
Previously, the validator had also stopped and then reopened a transaction. This practice is equivalent to turning off the computer and turning it on again causing a software update. In blockchain networks, this practice is done to avoid cyber attacks.
The floor cabinet itself sold for just 11 US cents on Friday (13/5) afternoon. Meanwhile, the price of Terra Luna has dropped to almost zero. In fact, the token reached $119 (1.7 million rupees) in April 2022, a month ago.
According to CoinMarketCap data, the total number of Luna tokens in circulation increased from 1.46 billion to 6.5 trillion as of Thursday (12/5).
Meanwhile TerraLuna’s relationship with floor cabinets is part of an effort to maintain the dollar peg. Thus, floor locker owners can exchange one UST (worth above or below $1 USD) for one luna and vice versa.
How does Terra USD (UST) affect the price of Terra Luna?
Terra Luna is a token created by Singapore-based Terraform Labs in 2018 that aims to track the value of the US Dollar or equivalent stablecoins, Tether and USDC as part of the Terra blockchain project.
Unlike other crypto assets, Terra does not store cash or other assets to back up its tokens.
Instead, Terra uses a complex code combination with the code “Luna” to stabilize prices.
Terra Luna, summarized as KompasTekno CoinDesk, plays an important role in maintaining the stability of the Terra USD (UST) coin.
A stablecoin is a cryptocurrency created to have the same value as a specific asset, such as a nationally issued currency (e.g. US Dollar/R) or another commodity such as gold.
Stablecoins were created to stabilize the price of cryptocurrencies. This is because the number of stablecoins circulating on the blockchain is equal to the number of authorized funds (issued currencies) held by the company.
However, UST differs from other stablecoins such as USDC and USDT in terms of pricing. This is because the bottom treasury uses an algorithm based on “smart contracts” to keep the price of Terra USD or UST stable at the level of 1 USD.
Technically, this method burns Terra Luna tokens to print new floor cabinet codes. In the Terra ecosystem, users can exchange Terra Luna for UST and vice versa with a guaranteed price of US$1. The price is guaranteed regardless of the price of the token in the cryptocurrency market.
So, if demand for floor lockers increases and the price rises above $1, Terra Luna owners can exchange them for floor locker tokens for a risk-free return.
Similarly, if the landowner’s asking price is low and the price drops below $1, the landlord can exchange their tokens for Terra Luna (when the price of Terra Luna goes up) at a 1:1 ratio.
UST is also important for Bitcoin investors, as Luna Foundation Guard, the organization that supports Project Terra, has billions of dollars of bitcoin available for sale at any time.
On Monday, September 5 (September 5), founder Lunar Kwon lent bitcoins worth $750 million to a trading firm to protect government bonds, and announced that he would buy more bitcoins when market conditions normalized.
This article was published under the title “Price Cut, Terraform Lab Postpones Terra Luna Coin Sale”.