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If you follow cryptocurrencies, you’ve probably caught the buzz around Terra (LUNA), a token that recently reached new all-time highs. LUNA is the ninth-largest cryptocurrency by market capitalization, with a circulating supply of 350 million coins.
LUNA may be a unique investment opportunity because it provides exposure to the stablecoin adoption story and to decentralized apps (dApps) within the Terra ecosystem. But before you jump in and buy yourself some LUNA, here’s a breakdown of what it is and how to earn rewards by staking it. We’ll also tell you where and how to buy LUNA in Canadian dollars.
LUNA is the native token of the Terra blockchain, which is a decentralized and open-source protocol well known for its stablecoins, including UST—its own U.S. dollar stablecoin.
Terra, founded in 2018 by Daniel Shin and Do Kwon, is among the largest blockchains by revenue, and it caters to users around the world, with stablecoins pegged to the U.S. dollar, South Korean won, the euro and the British pound, among others. Plus, Terra is a smart contract platform for blockchain-powered dApps that offer lending, borrowing, insurance and other services.
Unlike the price of bitcoin or ether, the price of a stablecoin remains constant relative to a particular asset or currency—for example, the U.S. dollar. So, 1 UST is equal to US$1. This stability facilitates frictionless global payments and makes cross-border trade more efficient, making stablecoins a compelling use case for cryptocurrencies. UST is unique among stablecoins because it doesn’t rely on dollar-denominated reserves to maintain its peg to the U.S. dollar; rather, it does this by automatically adjusting the supply of UST based on demand.
LUNA isn’t a stablecoin—it’s the Terra blockchain’s governance token, which allows LUNA stakers to submit and vote on proposals for Terra. LUNA holders are incentivized to participate in maintaining the Terra protocol by staking their tokens (more on this below) to receive rewards.
LUNA could be an attractive investment because it combines the real-world utility of price stability with the advantages of blockchain technology. In the long term, the price of LUNA will likely rise or fall based on the adoption of Terra stablecoins and the Terra protocol. The more widespread the use of UST, the higher the price of LUNA could be. Since LUNA is essential to the Terra blockchain, greater adoption of Terra could create more demand for LUNA, leading to higher prices.
As of early April 2022, LUNA is valued at over $110 per coin (all figures in U.S. dollars), 17% higher than at the start of the year. But that’s minuscule compared to its 14,000% gain in 2021. If you’d invested $1,000 in LUNA on Jan. 1, 2021, you’d now be sitting on over $140,000. The gain would be even higher if you’d staked your LUNA to earn rewards. But will the Terra protocol continue to grow? Two of the 10 biggest cryptocurrencies are stablecoins (USD coin and tether USD), and Terra is gaining traction as a blockchain platform for non-fungible tokens (NFTs), decentralized finance (DeFi) and Web3. This bodes well for UST and LUNA.
You can buy LUNA in Canadian dollars on a crypto trading platform like NDAX, which is a highly secure and fully compliant platform with a low transaction fee of 0.2%. It offers a large selection of cryptocurrencies, robust security standards, and multiple deposit and withdrawal options. It also provides customer service through live chat, email and phone, with an expected response time of 24 hours for messages received off-hours.
How to buy LUNA on NDAX
If you hold LUNA, you could stake it as a validator or a delegator and receive rewards of over 5% per year. Validators run full nodes of the Terra blockchain and are responsible for proposing new blocks. Delegators stake (or “bond”) their coins with a validator and earn rewards from two sources: gas and swap fees.
At the end of each block, transaction fees are distributed to validators, and delegators receive rewards in proportion to the LUNA they’ve staked. The more LUNA you stake, the more rewards you receive. Staked LUNA is locked and cannot be traded. If you decide to unbond it, the process takes 21 days, and you won’t be able to sell your coins during that time.
Investing in cryptocurrencies can be exciting and rewarding, but these assets are still very volatile. Learn about the risks involved, and be careful to invest only as much as you can afford to lose. It’s prudent to have a long investment time horizon and to only invest in cryptocurrencies if doing so is aligned with your risk profile and overall investment goals.