Terra Classic(LUNC)

Terra Classic is a proof-of-stake (PoS) layer-1 blockchain for decentralized applications with a native coin LUNA Classic (previously known as LUNA) and a suite of algorithmic stablecoins pegged to fiat currencies, such as USD, GBP and KWT. It was launched in 2018 by entrepreneurs Do Kwon and Daniel Shin. 

In May 2022, Terra’s UST stablecoin, supposed to trade at $1, lost its parity with U.S. dollar and led to a collapse of the broader Terra ecosystem. By May 2022, UST was the largest algorithmic stablecoin by market capitalization and the third-largest of all stablecoins. Its implosion sent the entire crypto market into panic mode, with BTC falling below $30,000. 

In response to the crash, the community approved the proposal by Do Kwon to launch a new blockchain called Terra 2.0 without UST stablecoin as a part of the revival plan. The old blockchain was renamed to Terra Classic, and its native token name was changed to LUNA Classic (LUNC), in the same manner as Ethereum Classic. 

Prior to the collapse of UST stablecoin and the network’s native token, Terra was viewed as a prominent “Ethereum killer”. Boasting high transaction throughput and network scalability, Terra Classic was the second-largest layer-1 ecosystem by total value locked (TVL), accumulating more than $30 billion in its protocols by May. 5, 2022. 

Yet, the future of Terra Classic is now bleak as 98% of TVL was sucked from the ecosystem by May. 25, 2022, according to Footprint Analytics, and the major projects are reportedly moving off the network. 

LUNC and UST may find it virtually impossible to recover in the face of continued community backlash and loss of trust in the ecosystem's digital assets.

LUNC price

Ассording to our LUNC USD live price chart, LUNC coin saw its first major spike in Q1 2021, when it rose from $0.65 on Jan. 1 to just under $22 on Mar. 21, 2021. That 3,200$+ rally was followed by an 81% drop in May 2021. LUNC was then trading sideways until late July. 

The price of LUNC jumped again as the market entered the Layer-1 speculative frenzy in August. LUNC’s growth was perpetuated by Terra’s Columbus-5 upgrade in September, sending the coin to a new all-time high of $46.73 on Oct. 8, as per Coin360 data. 

LUNC then peaked by the end of 2022, reaching a new all-time high above $90 on Dec. 27, 2021, and achieving a market capitalization of $38 billion, despite the bearish sentiment in the broader crypto market. 

The news that Terra’s UST stablecoin will be backed by Bitcoin and evidence that the Luna Foundation Guard, a non-profit organization responsible for safeguarding the UST peg, is actively purchasing BTC fueled the price of LUNC. Terra’s native coin updated its all-time high for the final time, printing a record of $116 on Apr. 6, according to LUNC USD price chart.  

How LUNC works

Terra Classic is a smart contract platform built on the Cosmos SDK that uses Tendermint BFT consensus. Terra Classic claims to enable up to 10,000 transactions per second with a transaction finality of 2 seconds. Since smart contracts are not native to Cosmos SDK, developers utilize an external CosmWasm toolkit to build multichain contracts on Terra Classic. 

Terra Classic built bridges to multiple blockchains such as Ethereum, Solana, Avalanche, Cosmos and some layer-2s, among the others, which at a time helped the network attract massive liquidity.

The native coin of Terra Classic LUNC (previously LUNA) is used to pay for transaction fees on the network and participate in governance. Users can also stake LUNC stake in order to validate transactions on the network and receive rewards. 

LUNC also serves as a collateral for TerraUSD (UST) stablecoin. The supply of LUNC is not capped and can grow exponentially, so LUNC token has no floor price. 

Terra Classic’s two-token UST-LUNA model was, at the time, admired by the crypto community as it made UST a “truly decentralized” stablecoin, unlike its centralized counterparts USDT and USDC, or MakerDAO’s Dai, which has a mix of centralized stablecoins in its reserves. The purpose of Terra Classic was to make UST a go-to stablecoin in the broader crypto ecosystem, as well as to bring it to non-crypto audiences through e-commerce use cases. 

TerraUSD utilizes a stability mechanism where LUNC is used as a backing and is burned or minted if UST diverges from $1. In case UST lost its peg under usual market conditions and went down to $0.99, for example, traders were incentivised to swap 1 UST for $1 worth of LUNA to make $0.01 in profit. The demand for UST would then increase and its price would return to the peg. A crucial aspect that was overlooked is how the value of LUNA is directly tied to the demand for UST stablecoin. This stabilization mechanism eventually sent both UST and LUNA into the death spiral. 

LUNC news, updates and highlights

Terra Classic saw a meteoric rise throughout Q4 2021 and Q1 2022, with its TVL growing threefold during this time frame. In the time of active growth, the demand for UST, and consecutively for native coin LUNC, was constantly increasing. This can be attributed to a 20% APY on UST stablecoin offered by Anchor protocol, native demand for UST from the growing Terra ecosystem, and an array of UST integrations into other blockchains and DeFi protocols. 

As a result, the market capitalization of UST swelled to nearly $18.5 billion before the crash, while Terra Classic’s native token LUNC had a market capitalization of nearly $42 billion at its all-time high, as per Coin360 data. 

The economy showed the first signs of contraction on May 7 after a whale reportedly swapped 85 million UST for 84.5 million USDC. The UST de-peg drama started on May 8, driven by a combination of negative factors that all played out at the same time. 

First, the sell-off in the US equities sent the crypto markets into extreme fear, and LFG reserves also took a hit, making it more difficult to maintain the UST peg even if the reserve assets are sold. Mass withdrawals of UST from Anchor protocol, the leading lender on Terra Classic, was another catalyst of the collapse as the withdrawn tokens were sold on centralized exchanges like Binance, creating selling pressure on UST. The Curve DEX UST pools were also drained as traders cashed out, with an imbalance in the Curve pool causing UST to lose its peg. 

You can read how the drama unfolded in detail in this article, but in short, all UST salvation attempts turned out to be botched. Prior to the crash, the Luna Foundation Guard (LFG) had stockpiled over $3.5 billion worth of reserves, including a stash of Bitcoin. As the LFG was trying to defend the peg, it almost emptied the reserves buying UST off the market for reserve assets. This resulted in a wide-reaching domino effect, sending down the price of Bitcoin and the major altcoins. 

Meanwhile, as confidence in a peg reversion waned, users redeemed billions worth of UST for LUNC and immediately sold it on the market, causing hyperinflation in LUNC. Trillions of LUNC coins were minted, and LUNC price crashed 100% in one week, plunging to effectively zero. 

In an attempt to reconstitute the network the Terra community voted to split the network into Terra Classic, which will preserve the old tokenomics model, and Terra (or Terra 2.0), which launched without UST on May 28, 2022. 

The future of Terra Classic after a new chain is born is hard to predict, but it’s safe to say that it won’t be able to grow larger than it was prior to the UST crash, both in terms of the asset prices and activity on the network. 

The rapid and brutal collapse eroded trust to the network among users and large investors, let alone scrutiny from South Korea’s financial regulators. The largest protocols with popular use cases are also migrating to the new Terra chain, Juno network, and Polygon, among other destinations. 

Unless excess LUNC that was minted after the UST de-peg is burned by the community decision, it is impossible for the token to get anywhere close to its all-time high given the current circulating supply of $6.54 trillion tokens.

One possible scenario for Terra Classic would be the one of Ethereum Classic, another forked network. Like in the case of Ethereum and Ethereum Classic, Terra and Terra Classic have completely different tokenomics. Another similarity here would be developer activity, as the newer chain has more builders and applications. 

Though significantly lagging Ethereum in terms of development and price action, Ethereum Classic is still alive and resides in the top 50 coins by market capitalization, according to Coin360 data. Yet, it’s unclear whether Terra Classic itself would be able to make it into the next bull market. 

Frequently asked questions about LUNC?

• Can you mine or stake LUNC?

LUNC is a Proof-of-Stake cryptocurrency, which means LUNC coins cannot be mined, but can be staked. Users can become validators themselves and receive rewards for validating transactions. Either way, LUNC holders can delegate their coins to a validator to earn rewards for staking. 

• What are some of the best LUNC wallets?

Terra Classic offers Terra Station, its native desktop and mobile wallet. 

• What can you do with LUNC?

You can use LUNC coins to pay for computing power on the Terra Classic network, stake them for staking rewards, or trade them against other cryptocurrencies.

• How to buy LUNC?

After the UST crash, major exchanges halted some trading pairs with LUNC. You can still buy LUNC on ByBit (LUNC/USDT trading pair), MEXC (LUNC/USDT), or Binance (LUNC/BUSD trading pair).