A look at Terra’s ecosystem

The original Terra token, LUNA, was one of the best performing cryptocurrencies in 2021, with gains north of 13,000%. Terra also surpassed Binance Smart Chain (BSC) in total closed value of $17.62 billion, making it the second largest DeFi chain after Ethereum.

Much of this growth is due to the Terra ecosystem, with a community of developers constantly building decentralized apps on top of Terra. But it may come as a surprise to learn that before there were hundreds of apps built on Terra, there were only two that existed at the beginning of 2021 in Mirror Protocol and Chai.

Mirror allows users to create synthetic assets, simulating the price behavior of traditional and digital financial assets. Traders use the mirror to get exposure to these markets without holding or owning the underlying asset. Chai, on the other hand, is a payments app that operates in South Korea with more than 2.5 million users. These applications are built on the basis of the real-world utility, which provides practical use for users and promotes the adoption of cryptocurrency.

Anchor Protocol

The third core application, the Anchor Protocol, launched on the mainnet in March 2021, but it quickly became a popular protocol for growing crops in the field of decentralized finance (DeFi). Anchor is designed to generate returns in the Terra stablecoin, TerraUSD (UST), by locking in LUNA or Ether (ETH) equivalent. So far, the total value of Anchor’s locked collateral has grown to $5.2 billion, according to the official website, which is already a 4375% change from the first day of its launch.

Collateral’s growth coincides with the expansion of its user base, growing daily at around 440 users, which, compared to Mirror, is growing almost three times faster. It can also be seen that the increase in the user base is growing along with the gradual rise in Terra transactions.

Increase in the number of orders

After basic applications, many new projects have appeared in the Terra ecosystem in the categories of games, metaverse, DeFi, non-fungible tokens, and many more. There are also several cross-chain communication protocols that enable Terra assets to freely migrate to other chains. For example, the Solana Wormhole v2 bridge protocol facilitates asset transfers across Terra, Solana, Ethereum, BSC, Polygon, Avalanche, and Oasis. This is made possible by the Terra’s Columbus-5 mainnet upgrade.

The developers have also built projects using the core Terra apps as a base. One such example is Orion Money, which uses the Anchor protocol to generate higher returns for other stablecoins such as Tether (USDT), Binance USD (BUSD), USD Coin (USDC), and Dai. It does this by using EthAnchor, converting stablecoins into rolled TerraUSD (wUST) and then depositing it in Anchor where the APY reaches 20%.

Why did Terra grow?

In July 2021, Terraform Labs, the company behind the Terra blockchain, raised $150 million from several investors, including Arrington Capital, Lightspeed Venture Partners and Pantera Capital. The funds were earmarked for incubating projects in Terra, which likely spurred further development.

However, Du Kwon, founder and CEO of Terraform Labs, thinks this is something more fundamental. In an interview, Kwon said that what underpins Terra’s strong community is rooted in the concept of decentralized money, which Terra is able to achieve with its algorithmic stablecoins.