Terra Classic – LUNC is the name given to the minus blockchain as a result of the fork of the Terra blockchain in May 2022. Terra is a decentralized blockchain protocol that allows blockchain users to create stablecoins. The Terra Classic blockchain allowed its users to instantly create, accumulate, buy, sell or exchange Terra Classic stablecoins.
The Terra Classic (LUNC) protocol is a protocol created to create stablecoins indexed to fiat currencies in the cryptocurrency world. By taking advantage of Terra Classic’s blockchain infrastructure, you can quickly and bilaterally create stable cryptocurrencies through smart contracts or convert your existing stable cryptocurrencies into assets equivalent to USD.
Delegated Proof-of-Stake (DPoS) algorithm is used as the consensus mechanism in the Terra Classic (LUNC) network. This is a more efficient and democratic version of the Proof-of-Stake (PoS) mechanism.
LUNC coin project
The Terra Classic protocol consisted of two main cryptocurrencies: Terra Classic stablecoins and LUNC coin. The largest stablecoin on Terra is USTC (USTC before the hard fork), whose price is theoretically equal to the US dollar.
Terra Classic suffered a serious loss in value in May 2022, due to the deterioration of price stability at USTC at 1 USD. While this depreciation reached up to 99.99 percent on the LUNC side, it reached up to 98 percent on the USTC side, whose theoretical value is 1 USD.
Before the hard fork, LUNC coin served as a native staking coin that absorbed the price volatility of stablecoins issued on Terra Classic. Through the Terra Classic platform, users can burn their LUNC coins and create stable cryptocurrencies such as USTC in return. For example, to create 1 USTC, 1 USD worth of LUNC coins must be burned.
Since the amount in circulation decreases with each LUNC coin burned, the LUNC price is positively affected by this transaction. Conversely, users can convert 1 USTC token into LUNC coin worth 1 USD at the current market price. In this case, negative pressure may occur on the price as the number of LUNC coins in circulation increases.
With the price fluctuation on the USTC side in May 2022 and the disruption of the 1 USD price balance, investors took advantage of the serious arbitrage opportunity between USTC and LUNC. This arbitrage was mainly due to the conversion between USTC and LUNC that we mentioned above. Investors easily converted the USTCs they bought at a low price into LUNC and sold them quickly. In this way, while new LUNC supply is constantly entering the market, the LUNC price has decreased significantly.
After this serious loss of value and trust, the LUNC project went to hard fork at block 7790000 in May 2022, creating a new LUNA blockchain with Terra 2.0.
Terra Classic (LUNC) Forking
Terra Classic (LUNC) project only allows transfers on the chain after the hard fork made by the main developer team in May 2022. The team, which temporarily stopped the production of swap and stable coins on the chain during the USTC crisis, did not make any developments or updates on the old blockchain after the fork.
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