Understanding Terra Ecology: LUNA Algorithm Stablecoin, Mirror Synthetic Assets, Anchor Savings Protocol
The stablecoin track space is huge, the competition is extremely exciting, and there are many participants. Algorithmic stablecoins have recently become a hot spot in the market and attracted a lot of attention. However, with the change of market hotspots, few people have talked about algorithmic stablecoin-related projects recently, and many algorithmic stablecoins are currently in an unanchored state.
Terra to be introduced today also belongs to the algorithmic stablecoin track, but it is significantly different from the recent hot algorithmic stablecoin projects. If you use one sentence to make the difference, it is that Terra is more like a regular army's style of play, not so Ponzi.
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1. Stable currency based on LUNA
The company behind Terra is Terraform Labs, headquartered in Seoul, South Korea. The founding members of Terra have a strong business background and resources, and established a payment alliance called "Terra Alliance". There are many leading e-commerce, music media, hotel booking and other platforms in Korea in the alliance. All members in the alliance can use Terra for payment or other business.
At present, many companies in South Korea and neighboring countries support Terra's stable currency payment. The use of Terra stablecoins is mainly carried out through CHAI and Meme Pay, two payment tools. CHAI focuses on the Korean market. Meme Pay is a Mongolian payment software that is directly integrated with banks. Among them, CHAI is the main product of Terra's stablecoin ecosystem, contributing the vast majority of transaction volume and number of users.
As shown in the figure below, the latest data showsCHAI currently has 2.2 million total users, 65,000 daily active users, and a daily transaction volume of 1.9 billion won, which is around 1.8 million U.S. dollars in U.S. dollars.
According to previous data, the transaction volume of CHAI in November 2020 exceeded 100 billion won, equivalent to nearly 90 million US dollars.
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Realization principle
After looking at the development situation, let's take a look at the realization principle of the Terra stablecoin.
Terra is a blockchain protocol based on the Cosmos framework. It is a separate chain. On this chain, Terra has developed and built a stable currency network and issued anchor coins of various legal currencies.
The stablecoin issued by Terra is an algorithmic stablecoin, and there is no backing asset like BTC, ETH or US dollar behind it, but it is endorsed by Terra's system token LUNA.
At present, the stable coins with large circulation in Terra are UST, KRT, SDT and MNT, among which UST is the US dollar stable coin, KRT is the South Korean won stable coin, SDT is the SDR (International Monetary Fund Special Drawing Rights) stable coin, and MNT is the Mongolian currency. Tugrik stablecoin.
The Terra system adjusts the stablecoin price through the arbitrage mechanism to keep the stablecoin anchored, as follows:
When the price of 1 KRT is < 1KRW (Korean Won), miners send 1 KRT to the system and get Luna tokens equivalent to 1 KRW. At this time, the supply of KRT in the system decreases, and the price rises gradually approaching the equivalent Korean Won;
When the price of 1 KRT > 1 KRW (Korean Won), miners send Luna tokens equivalent to 1 KRW to the system and get 1 KRT. At this time, the supply of KRT in the system increases and the price decreases, gradually approaching the equivalent KRW.
Miners in the Terra ecology are very important. Stablecoins are generated by miners pledging the native token LUNA. At the same time, when the price is unanchored, miners are also required to bear short-term fluctuation risks to mint/destroy the corresponding tokens to stabilize the price.
While protecting the network security, miners also undertake the function of stabilizing prices. Terra has designed deterministic income for miners to motivate miners, so that miners have the motivation to take risks for the normal operation of the network.
Every transaction in Terra will be charged a fee of 0.1% to 1%, capped at 1 TerraSDR, and the fee will be distributed to users participating in Staking.Rewards increase with transaction volume.
at the same timeThere is also seigniorage in Terra, when the demand for TERRA increases, the system will mint and sell TERRA to obtain LUNA, which is seigniorage,While taking risks, miners are rewarded in proportion to Staking.The system will burn a part of the earned LUNA, making the mining capacity more scarce. The remainder of the seigniorage goes to the Foundation to provide financial incentives.
We can see that Terra's stablecoin system is backed by LUNA. When the price of LUNA fluctuates sharply, the stablecoin may be unanchored, which is where the market doubts about the Terra system.However, with the continuous growth of the number of users and transaction volume of Terra, and the continuous stabilization of the user base, the anti-risk capability of the Terra system will be enhanced.
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2. Mirror Protocol
Mirror Protocol is a synthetic asset platform through which synthetic tokens of assets such as stocks, futures, and exchange funds can be minted and traded. Users can directly trade various top assets around the world through the Mirror Protocol, and 14 synthetic assets have been launched so far.
The casting of synthetic assets in Mirror is mainly carried out through UST,Other existing synthetic assets can also be selected for casting when casting. The minimum mortgage ratio for UST casting is 150%, and the minimum mortgage ratio for other synthetic assets is 200%.
Mirror has reached cooperation with multiple DeFi protocols to expand the use of its synthetic assets, such as Injective, UniLend, Mask, etc. Injective will support the synthetic assets on Mirror in its second-tier derivatives trading protocol; UniLend will support the use of Mirror's synthetic assets as collateral assets for loans; Mask will introduce Mirror's synthetic assets into Twitter. Mirror has the unique advantage of expanding the application range of its synthetic assets.
Mirror built an Ethereum bridge on the basis of the original network, so that users on Ethereum can also use Mirror's services, and at the same time, Mirror's synthetic assets can also be circulated on Ethereum.
Mirror also recently completed the Binance Smart Chain bridge, bringing stock synthetic assets into the Binance community. Currently, the synthetic tokens of Amazon, Google and other stocks can be traded on PancakeSwap, a decentralized exchange on Binance Smart.
Mirror's tokens are distributed through a fair start. The total number of MIR issued is 370,575,000, which will be distributed within four years. At the beginning of creation, Mirror Protocol issued 54.9 million tokens, and the distribution ratio is as follows:
In the following four years, MIR will be allocated to investors and community users who conduct liquidity mining on Terraswap or Uniswap at a fixed rate. At the end of the 4th year, the final allocation ratio of MIR is as follows:
Airdrop 4.9%: distributed to UNI holders and LUNA stakeholders;
LUNA staking reward 4.9%: distributed to LUNA stakers in the first year of starting the agreement;
mAsset LP mortgage 45.1%: allocated to the mAsset mortgage pool within 4 years;
MIR LP mortgage 10.4%: allocated to the MIR-UST mortgage pool in 4 years;
Community pool 34.6%: allocated to the community reserve pool over a 4-year period.
In addition to participating in governance, MIR will charge a 1.5% agreement fee when users destroy the minted synthetic assets to retrieve collateral, and the fee will be distributed to MIR stakeholders. In terms of income, the official website shows that the 24-hour fee income is 51,000 US dollars, based on this calculation, there will be 1.5 million US dollars in monthly fee income.
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3. Anchor
Anchor is a new DeFi savings product that offers reliable interest rates on stablecoin deposits. Anchor is governed by the Interchain Asset Association, whose members include Terraform founder Do Kwon, Cosmos core developer Zaki Manian, and Web3 Foundation consultant Jack Platts. It has been publicly reported that the three companies plan to launch Anchor on their respective blockchains and will expand it to other PoS blockchains in the future.
Anchor is not yet online. According to the previously announced news, it has been seriously overdue. Here is a brief introduction of what it wants to do and its principle based on public information.
Anchor is a DeFi protocol that combines the Staking mechanism. The assets deposited through it will be used for Staking, and at the same time generate Staking derivative tokens. While obtaining Staking income, the derivative tokens are used to maintain the liquidity of assets.
The assets deposited by users will enjoy the profit sharing of Staking, so that users can obtain reliable interest rates. At the same time, derivative tokens can be used as collateral assets for lending.
If you use simpler language to summarize, Anchor can understand the Staking asset liquidity release protocol, which is similar to the well-known Bifrost and Stafi, but it is different in the support of stable currency deposits. At the same time, Anchor also added the function of using derivative assets as collateral for lending.
Disclaimer: This article is the author's independent opinion, does not represent the position of the Blockchain Institute (public account), and does not constitute any investment opinion or suggestion.
References
https://station.terra.money/governance
https://www.chainnews.com/articles/229007499660.htm
https://www.chaiscan.com/server/web/ChartPaymentTx_selectPage?LANG=zh_CN
https://docs.mirror.finance/protocol/mirror-token-mir#mirror-token-supply
https://docs.mirror.finance/protocol/mirror-token-mir#cumulative-distribution-schedule-in-millions
Disclaimer: This article is the author's independent opinion, does not represent the position of the Blockchain Institute (public account), and does not constitute any investment opinion or suggestion.
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