What Is Luna And Is It Illegal?
Terra is a blockchain network constructed the usage of Cosmos SDK that specialize in stablecoin advent. Rather than use fiat or over-collateralized crypto as reserves, every Terra stablecoin is convertible into the community's native token, LUNA. LUNA permits holders to pay community costs, participate in governance, stake within the Tendermint Delegated Proof of Stake consensus mechanism, and peg stablecoins. To peg a stablecoin like TerraUSD (UST), a USD price of LUNA is convertible at a 1:1 ratio with UST tokens. If UST's charge is, for example, at $zero.98, arbitrageurs switch 1 UST for $1 of USD and make 2 cents. This mechanism will increase UST call for and also reduces its supply as the UST is burned. The stablecoin then returns to its peg. When UST is above $1, say at $1.02, arbitrageurs convert $1 of LUNA into 1 UST and make 2 cents. The supply of UST will increase, and call for for UST also decreases, bringing the price back to peg. Apart from reducing stablecoin vola