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What is Terra (LUNA) used for?

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Source: @crypto-guides


There is a section in the "What is Terra (LUNA) coin? - Terra Guide" titled "What is Terra (LUNA) used for?"; with this post I hope to contribute an item or two we don't usually hear about from both legacy media and even cryptocurrency-oriented media. For @crypto-guides -- Feel free to adjust as needed for Guide purposes.


Imagine a cashless payment system where you as the customer can pay for things using your card or mobile device (check). Imagine going to a merchant which accepts one of several such cards or mobile device services (check). Now imagine being in a region where instead of "several" there are at least 45 such cards or mobile device services accepted. Now imagine the nightmare it must be to handle 45+ ways to pay for something "without cash" in hand. Terra (LUNA) is used to turn this nightmare into a painless dream, and this dream into reality. A crypto payment solution is what Terra (LUNA) is used for.

The Terra Protocol: What Is It?

According to Steve Walters at Coinbureau.com,

Terra is a blockchain protocol that develops and supports stable payments and open financial infrastructures. The entire protocol is supported by a basket of seigniorage style stablecoins pegged to various fiat currencies. All are stabilized algorithmically by the native asset of the blockchain, the LUNA token.

That's a lot of information packed into that paragraph. So let's unpack it:

"Terra is a blockchain protocol that develops and supports stable payments and open financial infrastructures."

As noted earlier, there are numerous payments systems used for handling "digital money"-- more than 45 just in Asia alone. These payments systems are built on outmoded technological infrastructure, and they encourage the use of intermediaries looking for their cut of transactions fees. Terra is made to streamline the payments process.

"The entire protocol is supported by a basket of seigniorage style stablecoins pegged to various fiat currencies."

Terra uses a series of stablecoins pegged to the values of major world currencies. These include stablecoins for US Dollar (TerraUSD), Euro (TerraEUR), British Pound Sterling (TerraGBP), Chinese Yuan (TerraCNY), Japanese Yen (TerraJPY), South Korean Won (TerraSKW), even Special Drawing Rights (TerraSDR) from the International Monetary Fund. In this way, the Terra stablecoins offer seamless cross-bordeer exchange with virtually instant settlement times.

"All are stabilized algorithmically by the native asset of the blockchain, the LUNA token."

To keep payments as close to currency values as possible, Terra's native token LUNA is issued or burned as needed in order to maintain the pegs each stablecoin have with their respective currencies. When transacion volume is high, the Terra network creates more LUNA tokens. When transaction volume is low, the Terra network buys back LUNA tokens for the purpose of burning them. Algorithms are used to determine when to create or burn LUNA tokens.

The Case of Asian E-Commerce

As noted by the Cryptopedia at Gemini.com, at least 45 digital payment services are used throughout Asia. Among these are Alipay, ApplePay, KakaoPay, and SamsungPay. Each has its own infrastructure, and each expects its cut of transaction fees when it is called on by a customer at a merchant. Add to this the ForEx (Foreign Exchange) layer when a customer from Country A uses the services in Country B.

Terra (LUNA), was made to improve the efficiency of digital payments for both merchants and customers. As with many crypto-based solutions, Terra (LUNA) aims to reduce the insane number of intermediaries involved in a process (in this case, digital payments).

Built using technology from the Cosmos blockchain, Terra (LUNA) was built as a comprehensive end-to-end digital payment solution which can bypass the entire existing-- and outdated-- fragmented digital payments infrastructure.

Terra (LUNA) makes this possible by using stablecoins for various fiat currencies (USD, EUR, GBP, CNY, JPY, KRW, SDR, and others) to keep ForEx exchanges in line with their cash equivalents.

As with most crypto-based solutions, transaction are made faster while fees are reduced. Merchants who accept credit cards have to pay credit card fees of 2.8% or more-- and if the merchants have to pay that 2.8% or more, that means their customers have to pay that-- for the privilege of waiting 7 days for the transactions to settle before they can collect. On the other hand, merchants who use Terra pay a 0.6% transaction fee and receive payments in 6 seconds.

The LUNA of Terra (LUNA)

The LUNA token is used to maintain equilibrium among the various Terra-based stablecoins. That's a pretty important function for a token.

Besides helping the Terra stablecoins maintain their pegs, LUNA is used for staking and for governance within the Terra network. Community proposals are submitd and voted upon

Holders of staked LUNA receive 100% of the transaction fees generated by the stablecoin payments. This helps increase network effects for Terra while accelerating adoption of the stableecoin.

Like Hive, Terra (LUNA) is a Delegated Proof of Stake (DPoS) cryptocurrency which can be staked. Holders of staked LUNA can vote on Validator-submitted proposals in proportion to the amount of LUNA they staked. Also, Validators (known in Hive as "Witnesses") gain voting rights regarding any and all vital updates to the Terra network.

Conclusion

Terra (LUNA) is used to solve the payment problems encountered by merchants everywhere: unpleasant credit card fees and lengthy settlement times prior to receiving payment.

With fees well below 1%, customers keep more of their money. With 6 second settlement times instead of the 7 days for credit card payment settling, merchants get paid faster.

With its algorithmic use of the LUNA token with its stablecoins, Terra is able to generate rewards to holders of staked LUNA.

It's been said that the hardest thing to do is to make something easy. This is definitely the case when it comes to digial payment solutions within the context of Asian E-Commerce.

If Terra can solve the problems involved with merchants needing to handle 45 or more payment systems, imagine what Terra can do elsewhere in the world.

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