$LUNA is the native cryptocurrency of the Terra blockchain. However, to fully understand LUNA, it's essential to recognize the significant events in its history, which led to the creation of two separate chains and tokens:
1. Terra Classic (Original Chain) and LUNA Classic ($LUNC )
The original Terra blockchain, launched in 2018, operated a dual-token system with:
**Terra Stablecoins (e.g., TerraUSD or UST): Algorithmic stablecoins designed to maintain a price peg (e.g., UST to the US Dollar).
LUNA (now LUNC or LUNA Classic): The native staking and governance token.
Original Purpose of LUNA (LUNC):
Stablecoin Stabilization: LUNA was the mechanism used to maintain the stablecoins' peg. If UST traded above $1, LUNA was burned (removed from circulation) to mint more UST, increasing supply and lowering the price. If UST traded below $1, UST could be burned to mint LUNA, decreasing the UST supply and raising its price. This system collapsed in May 2022.
Staking and Validation: It was staked to validators to secure the network using a Proof-of-Stake consensus mechanism, earning rewards for transaction verification.
Governance: LUNA holders could vote on protocol changes and proposals.
2. Terra (New Chain) and LUNA (Current)
Following the collapse of the original algorithmic stablecoin UST and the subsequent crash of the original LUNA (now LUNC), the community approved a proposal to launch a new blockchain.
Purpose of the New LUNA (Terra 2.0):
No Algorithmic Stablecoins: The new Terra chain does not include the algorithmic stablecoin model that failed in the original chain.
Native Staking and Governance: The new LUNA token's primary uses are:
Staking: Holders stake LUNA to validators to secure the network and earn staking rewards.
Governance: LUNA holders have voting power over the protocol's future upgrades, fee structures, and treasury allocations.
Ecosystem Revival: The new chain aims to rebuild the Terra ecosystem for Decentralized Applications (dApps), focusing on a resilient, community-driven infrastructure.
In summary, when someone refers to LUNA crypto today, they are most likely talking about the token on the new, rebuilt Terra blockchain, which focuses on network security and governance without the old algorithmic stablecoin mechanism. The original token and chain are now referred to as LUNA Classic (LUNC) and Terra Classic.
