After the launch of “Terra 2,” the native token of the new network inherited the LUNA name, while the old blockchain’s token was rebranded to luna classic (LUNC).
The goal of Terra Labs, the firm that developed the coins, is that the protocols and applications of the former network will migrate to the new blockchain (Terra 2). But as of June 2022, the future utility of the original Terra blockchain is uncertain.
Luna classic price
As of May 2022, LUNC’s all-time highest price was $119.02 (when it was still the old LUNA token), recorded in April 2022. The token rallied past $100 from a few dollars in less than a year and became one of the top 10 cryptocurrency by market capitalization as sustained demand for Terra’s stablecoin resulted in a dwindling LUNC supply.
The main trigger for the demand was Anchor, Terra’s yield-generating platform, which offered eye-popping but ultimately unsustainable, annual rewards on UST deposits of up to 20%. As deposits on Anchor blasted through $14 billion in UST in April 2022, the circulating supply of the old LUNA tokens fell below 400 million tokens for the first time ever.
In early May 2022, UST’s price deviated from the $1 peg and investors started to flee from Anchor, which was the main driver for UST’s demand. Steps to recover the peg proved to be short-lived, and UST lost its price peg during the week of May 9, 2022 again, eventually falling to pennies. UST’s collapse and the bank run on Anchor drove the original LUNA into a hyperinflationary cycle and the token’s price fell to cents.
How does luna classic work?
Luna classic was created to be the native token of the original Terra blockchain. It acted as the twin token that was designed to absorb any price deviation of the blockchain’s algorithmic stablecoin, TerraUSD (UST). UST was supposed to keep a one-to-one exchange rate to the U.S. dollar by creating (minting) and (destroying) burning UST tokens to balance the stablecoin’s supply and demand at a $1 price peg.
Key events and management
In early 2018, Do Kwon and Daniel Shin launched the Terra network with plans to develop an e-commerce payments app with a price-stable cryptocurrency.
In July 2021, the company raised $150 million from investors, including Arrington XRP Capital, Pantera Capital, Galaxy Digital and BlockTower Capital. The funding went to Terra’s Ecosystem Fund, which sponsors projects on the Terra blockchain. Prior to that, the company had raised $25 million in January of the same year.
In September 2021, Kwon was served with a subpoena by the U.S. Securities and Exchange Commission, asking him to testify about Terra’s Mirror Protocol. The following month, he and his company sued the SEC, alleging that the subpoena had been improperly served and that the SEC had failed to keep its investigation confidential because Kwon had been served in person at a conference.
Early 2022 marked the launch of the Luna Foundation Guard (LFG), an organization that was tasked to create a forex reserve for the UST in case of a severe crisis in the peg. LFG stepped up as a significant and very public buyer of bitcoin, amassing a $3.5 billion stash in cryptocurrencies (mostly held in bitcoin) in its reserve.
On May 8, 2022, UST’s price deviated from the $1 peg and investors started to flee from Anchor, which was the main driver for UST demand. Steps to recover the peg proved to be short-lived, and UST lost its price peg on the week of May 9 again eventually falling to cents. Parallelly, UST’s collapse drove LUNC into a hyperinflationary cycle and the token’s price fell to cents.
As part of the efforts to revive the Terra ecosystem, the community voted to launch a new blockchain called Terra 2. That coin was released in late May 2022. The tokens were distributed to holders of the old LUNA tokens and to holders of UST stablecoins.
The old blockchain (Terra) remained intact, its native LUNA token was rebranded to luna classic (LUNC), and UST was kept in circulation.
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