9-Will Terra crack the Top 3 in Q4?
Oct, 2021, [email protected]
In the last quarter, several blockchains have blossomed in the bull market, overtaking older projects.Polygon, which emerged in May, has seen a lack of growth after three months, and its TVL has dropped. Meanwhile, Terra and Solana have overtaken Polygon in mid-August and early September respectively, and Avalanche is also gaining momentum, with a trend of overtaking Polygon. Polygon was the third largest TVL public chain after Ethereum and BSC, and may drop to 6th place. Footprint Analytics already conducted an in-depth analysis of Solana and Avalanche (details can be found at this link), and this time we will continue to use DeFi data from Footprint Analytics to take a look at Terra.
TVL by Blockchain （since Jan 2021） Data source:Footprint Analytics
Focus on finance and Connect off-chain data
Terra launched in January 2018 and the main network in April 2019, behind the operation of Terraform Labs, based in Seoul, South Korea. Terra has 3 funding rounds from 2018 to 2021, with a cumulative funding of over $200 million. The most recent funding was $150 million on July 16, 2021, which was primarily used to fund the construction of ecosystem projects on the Terra.
The most obvious feature that distinguishes Terra from other blockchains is its founding team's extensive business background and resources. Its two payment programs, CHAI and MemePay, have opened up offline payment scenarios in Korea and Mongolia respectively. This makes Terra a “real” blockchain that can be linked to real life.
Unlike other blockchains that have only one blockchain token, Terra has both Luna and its native stablecoin UST, anchored to USD, as well as the stablecoin KRT, anchored to South Korean won, and the stablecoin MNT, anchored to Mongolian Tugrik, and the stablecoin SDT, anchored in the International Monetary Fund's Special Drawing Rights SDR.
Double-token model, UST ranks 4th in market cap among stablecoins
Terra Chain uses a double token model, with Luna, a token mainly used for governance, staking and verification, and UST, a native stablecoin anchored to the USD. UST is backed by Luna, and for every UST minted, one dollar worth of Luna must be burned, and Luna maintains the anchoring of UST to the USD through an arbitrage mechanism.
Compared to other blockchains with numerous protocols in the ecosystem, the entire Terra protocol is set up around its original stablecoin UST. The protocol on Terra comes with its own UST transaction context since its inception, and the UST can be connected to offline payments.
Maker Cap of Stablecoin（End of Sep,2021） Data source:Footprint Analytics
As seen through Footprint Analytics, UST has the fourth highest market cap among the common stablecoins on the market currently ($2.673 billion). The first and second ranked USDT and USTC are centralized stablecoins, and the third ranked Dai can't be considered a completely decentralized stablecoin, and the decentralized stablecoin UST can be considered the top. This is inextricably linked to Terra's access to offline platforms, which is the most "useful" stablecoin compared to other stablecoins. It has loaded the "illusory" blockchain world with real usage scenarios, which is also reflected in its own market capital.
Luna grows 416% in four months, jumps to Top 5 in blockchain tokens
Luna is the PoS token for Terra, meaning the higher the price of Luna, the more secure Terra will be. The demand for Terra stablecoin UST, which is generated from miners pledging LUNA, is not only in Terra, but also in other blockchains, so the application of UST in other blockchains is actually an expansion of the value of LUNA to other blockchains. While for other blockchains, the value of their native tokens is only gained through the amount of transactions and cannot be captured beyond.
Since Terra launched its main network in April this year, Luna had a small rise, and after falling after the "519" token price plunge incident, it gradually pulled up again in July and rose sharply in August, from $6.55 at the beginning of June. Overall, it has risen about 416%. But from the data of Footprint Analytics, we can see that Luna now has the fifth highest price among blockchain tokens. Though its price is half of the 4th place AVAX, its trading volume has been comparable with AVAX, and even far more than MATIC. Clearly, this kind of blockchain, which connects online and offline, sees a lot of transaction volume.
Price of Luna（since Jan 2021） Data source:Footprint Analytics
Token Volume by Blockchain（since Jan 2021） Data source:Footprint Analytics
Nevertheless, given that UST is anchored by $1 Luna as a stablecoin, volatility in Luna’s price will also cause UST to break away from the $1 anchor. However, many analysts believe that the stability of the blockchain will be gradually strengthened as the number of Terra users and transactions gradually increase.
Ecosystem tightens around stablecoins, Mirror tokens most actively traded
Compared to other blockchains with extensive ecosystem protocols, Terra seems to be much more "streamlined", with its ecosystem protocols being tightly focused on UST, with Mirror (synthetic asset protocol) and Anchor (fixed APY savings protocol) being designed to create immediate use cases and demand for its stablecoin.
TVL by Protocol in Terra（ End of Sep,2021） Data source:Footprint Analytics
The TVL of each protocol on Terra from Footprint Analytics shows Anchor, Lido, Mirror, and Terraswap currently make up about 95% of the project’s TVL. This nearly catches up with Solana's TVL, but Terra's growth has been steadier than Solana's, which has been explosive
Anchor is the head protocol on Terra and currently has a TVL of $3.08 billion. Anchor is a savings protocol that offers a fixed APY, similar to a bank, where Anchor will lend out deposits but requires the borrower to provide assets as a stake.
Mirror is similar to Synthetix as a synthetic asset protocol, but Mirror's current TVL in Terra and Ethereum is already comparable to Synthetix. Mirror currently covers a variety of synthetic assets such as US stocks, BTC and ETH. It provides a powerful application scenario for UST, and will also increase miners' income and make Terra's system grow towards more stability.
Data source:Footprint Analytics
From the volume of each protocol token, Mirror's token, MIR, has the highest volume in the last 90 days, although its token price is only $2.81 as of Oct 13,2021, it can be seen that its volume is relatively active compared to other protocols on Terra. This is inextricably linked to Terra's efforts to bring cryptocurrencies into the real world, and Mirror is now an industry leader in synthetic US stock trading.
Summary
Terra is a distant match to the recently surging SOL and AVAX in terms of token price, but its steadily growing TVL nearly surpasses Solana again. Terra also upgraded Columbus-5 on September 30 at block height 4460000. Whether Terra can surpass Solana after this upgrade is worthy of our expectation.
Terra stands out from other blockchains because it comes with its original stablecoin, UST, and its protocol has been developed closely around UST. Compared with centralized stablecoins, UST is more centralized and there is reason to believe that in the future UST can be comparable to DAI. Terra is also connected to the Korean and Mongolian markets through CHAI and MemePay, linking the "virtual" with the real world. This organic combination of on-chain and off-chain is the key driver for Terra to catch up with other blockchains.
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