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The Terra Network


brianwalden
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I just recently discovered Terra and am really enjoying playing around on it so far. This is all new to me, so please correct me if I get something wrong. The ledger is Terra, it's in the Cosmos ecosystem of networks, the native coin is LUNA, and the wallet is Station (you can get it both for mobile and as a browser extension). Coming from a Ripple background, I really like Terra's basic philosophy. They're focused on payments, decentralization, and making financial services available to everyone. It reminds me of the early days of Ripple before they gave up on the ecosystem to go chase banks (I'm not being judgmental, it's just a fact). For the record I still have my XRP bags from 2014, the only thing I took out is my original investment. I still think the moon is in the future.

The foundational reason that Terra exists is to settle real-world payments. It's the backend being used by the Korean payments service CHAI, as well as a Mongolian payments service (sorry don't know the name). One of the main uses of LUNA besides staking with validators is to issue algorithmic stablecoins. I think right now they issue UST (US Dollar), KRT (Korean Won), SDT (The IMF's special drawing rights), and whatever Mongolians use. I think they intend to issue a number of currencies moving forward. To mint a new UST, for example, they burn $1-worth of LUNA. If demand for UST goes down, they will do the same thing in the opposite direction and mint $1-worth of LUNA for each UST burned.

Network transaction fees are pretty low, usually less than a dollar, but some are more. I don't think I've seen a transaction fee more than $2. Transactions only take a few seconds. Many dapps built on the network only accept fees in UST, not LUNA, so make sure you always keep some of both in your wallet for fees. Terra issues ERC-20 (Ethereum) and BEP-20 (Binance) versions of its major coins and they have a Terra Bridge to transfer between networks. You can buy UST, LUNA, or MIR on either Ethereum or Binance and then use the bridge to send it to your Station Wallet on the Terra network. Just make sure you use the bridge, you'll lose your coins if you just try to send them directly. Once you get funds into Terra, you can use Terra Swap to swap between tokens.

I'll go through some of the major decentralized services built on the network in the comments.

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2 hours ago, brianwalden said:

I just recently discovered Terra and am really enjoying playing around on it so far. This is all new to me, so please correct me if I get something wrong. The ledger is Terra, it's in the Cosmos ecosystem of networks, the native coin is LUNA, and the wallet is Station (you can get it both for mobile and as a browser extension). Coming from a Ripple background, I really like Terra's basic philosophy. They're focused on payments, decentralization, and making financial services available to everyone. It reminds me of the early days of Ripple before they gave up on the ecosystem to go chase banks (I'm not being judgmental, it's just a fact). For the record I still have my XRP bags from 2014, the only thing I took out is my original investment. I still think the moon is in the future.

The foundational reason that Terra exists is to settle real-world payments. It's the backend being used by the Korean payments service CHAI, as well as a Mongolian payments service (sorry don't know the name). One of the main uses of LUNA besides staking with validators is to issue algorithmic stablecoins. I think right now they issue UST (US Dollar), KRT (Korean Won), SDT (The IMF's special drawing rights), and whatever Mongolians use. I think they intend to issue a number of currencies moving forward. To mint a new UST, for example, they burn $1-worth of LUNA. If demand for UST goes down, they will do the same thing in the opposite direction and mint $1-worth of LUNA for each UST burned.

Network transaction fees are pretty low, usually less than a dollar, but some are more. I don't think I've seen a transaction fee more than $2. Transactions only take a few seconds. Many dapps built on the network only accept fees in UST, not LUNA, so make sure you always keep some of both in your wallet for fees. Terra issues ERC-20 (Ethereum) and BEP-20 (Binance) versions of its major coins and they have a Terra Bridge to transfer between networks. You can buy UST, LUNA, or MIR on either Ethereum or Binance and then use the bridge to send it to your Station Wallet on the Terra network. Just make sure you use the bridge, you'll lose your coins if you just try to send them directly. Once you get funds into Terra, you can use Terra Swap to swap between tokens.

I'll go through some of the major decentralized services built on the network in the comments.

I've only heard good things about Terra and specifically Anchor which has been giving ~20% APY (~13% with insurance). I haven't gotten on to it yet for two reasons:

  • Synthetic Assets on Mirror are very likely illegal
  • There are no fiat on-ramps to Terra/Luna to my knowledge (There is USDT, which I try to stay away from)  I'm usually nervous about not having any fiat on-ramps. It's too high risk/high reward for me.

Disclaimer: This kind of thinking about fiat on-ramps is why I didn't buy XRP much much earlier than I should have. So I lost out a lot of profits from this thinking. But it also helped protect me from some significant losses, so I don't mind.

Edit: Also, Proof of Stake puts me off. I'm fully comfortable with using products built on top of Proof of Stake platforms, but I don't see myself investing into the platforms themselves. I'm sure I'll regret this hard-line stance in the future.

Edited by Ripley
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The Anchor Protocol (the various services built on top of the Terra network tend to call themselves protocols) might be the easiest place to start with DeFi on Terra. It's designed to be a savings account that's simple for everyone. All you have to do is deposit UST and earn ~20% APY. The rate is variable, but it's aimed at holding a target of 20% - it's usually within 1% of that target. The great thing is that the interest is paid in UST and accumulates automatically, you don't have to claim it or deal with being paid in governance tokens. The interesting thing is that when you deposit your UST, you get aUST in return, which is basically like your coat check ticket to get your UST back - so be careful not to lose it. If you spend it or trade it, you won't be able to get your UST and accrued interest back. But what's interesting is that you can then use that aUST in other platforms on the network. The only place I know where you can use it right now is as collateral to borrow synthetic stocks in Mirror.

The next thing you can do is put up bonded LUNA, bLUNA, which is a tokenization of staked LUNA (we'll get into that later) to borrow UST. You pay interest on the UST that you borrow, but you're paid an even higher rate in Anchor's governance token, ANC, so that you're actually being paid to take the loan. One thing to remember is that the interest rate is paid on the amount you borrow, not the amount you put up as collateral - so take that into consideration when calculating how much you'll earn. When you put your bLUNA as collateral, Anchor takes all the staking rewards and uses them to help pay out the interest to people who deposit UST for the 20% return. This is how Anchor keeps the 20% interest rate stable. When it falls too low, it offers to pay UST borrowers a higher rate of ANC rewards to get more people to deposit more bLUNA. When the rate goes too high, it lowers the ANC reward rate. If you use bLUNA to borrow UST, you have to claim your ANC rewards on the governance page.

I'll try to explain bonded LUNA. When you stake LUNA you get bLUNA - it's like aUST, it's your receipt for the LUNA you've staked. Staking rewards and airdrops get paid out according to how much bLUNA each wallet holds at the time. It takes 21 days to unstake your bLUNA and turn it back into LUNA. Because of this wait, there's a market between LUNA and bLUNA on terra swap. Since 3 weeks is forever in crypto, people are willing to pay a premium to trade their bLUNA for LUNA, so I've found that it's easier to just trade to get bLUNA rather than stake LUNA myself. I haven't gone back the other way yet, but I'll probably just pay the price and trade rather than wait three weeks to unstake LUNA.

The governance page is where you claim your ANC rewards from borrowing UST. After you claim them, you can stake them to earn interest, or you can put them into a liquidity pool with UST to earn even higher rates, or you can use it to vote on proposals. Or if you don't want to keep it, you can sell the ANC and reinvest it.

If you just want to set it and forget it, just deposit UST into Anchor Earn and watch it grow. I chose to buy bLUNA and put it up as collateral to borrow UST and then put that borrowed UST into earn. Honestly, I got lucky and LUNA has been on a tear since I bought in. Unfortunately that means everyone wants to hold LUNA right now so the rates I get for borrowing against it aren't great - I think they're about the same as if I hadn't bought LUNA and just put my UST into earn. But this way I'm exposed to LUNA's price action, which I want right now since it's going up. My plan when the market goes south is to repay what I've borrowed, convert all my bLUNA back to UST and just stick that in earn so I get 20% with no risk. When my ANC tokens build up to a big enough amount, I claim them and sell them. At this point in time I'm skeptical of governance tokens - too many people just sell them and they seem to just slowly go down in value over time.

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1 hour ago, Ripley said:

Synthetic Assets on Mirror are very likely illegal

I'm sure that they are. But are they illegal for me to own, or just for them to sell?

1 hour ago, Ripley said:

There are no fiat on-ramps to Terra/Luna to my knowledge (There is USDT, which I try to stay away from)  I'm usually nervous about not having any fiat on-ramps. It's too high risk/high reward for me.

Yeah I don't know of any direct onramp. I'm in New York, I've only got access to Coinbase and Gemini, so this is particularly big for me. But Terra has issued its main tokens on Ethereum and Binance, so if you can buy the ERC-20 or BNB-20 versions one way or the other, you can use the Terra Bridge to get them onto Terra, and vice versa. Once you have funds on Terra, you can easily trade for whatever you want using Terra Swap. It takes a few steps and you have to know what you're doing when bridging networks, but I think I can make it work for me. Right now all I can really do with my XRP is sell it for USD.Bitstamp on the XRPL and then sell it back - I don't have an easy way right now to get the value back into fiat if I need it.

1 hour ago, Ripley said:

Also, Proof of Stake puts me off. I'm fully comfortable with using products built on top of Proof of Stake platforms, but I don't see myself investing into the platforms themselves.

I'm with you, I think that in the long run PoS is going to end up holding networks back the way PoW does now. But the long run may take a long time to come. I could have bought ETH at the presale but didn't because I thought Ethereum would be too slow and too expensive. It is, but it's also wildly successful - certainly the biggest and most used DeFi ecosystem.

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15 minutes ago, brianwalden said:

I'm sure that they are. But are they illegal for me to own, or just for them to sell?

It would depend I think. I think the question is what is it that you’re actually owning. It doesn’t give ownership of the company and as soon as they formally make it illegal, they lose all value. 

The SEC may not come after you personally, realistically speaking, but it may technically be illegal for you to sell them back.  

18 minutes ago, brianwalden said:

But Terra has issued its main tokens on Ethereum and Binance, so if you can buy the ERC-20 or BNB-20 versions one way or the other, you can use the Terra Bridge to get them onto Terra, and vice versa. Once you have funds on Terra, you can easily trade for whatever you want using Terra Swap.

I am quite comfortable jumping through these hoops in terms the technical complexity involved. The challenge is the regulatory uncertainty. For example, if a token this popular wasn’t available in the US, or have Fiat onramps, it is likely that there is a potential issue there. Not a certainty, but a possibility. And while it may be possible to jump through hoops, whether through crypto or through VPN etc, it would essentially be a circumvention of the regulatory framework. 
 

Again, I think for those who take the risks, it might be worth it. My risk threshold is ends by having a significant exposure to crypto in the first place, especially with something like XRP in the mix with the non-stop FUD. That’s an extreme risk/reward situation already IMO. 

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The Mirror Protocol issues synthetic stocks and other cryptos. Their mAssets are pegged to the price of the real world assets they represent, 1 mAAPL represents one share of Apple stock, etc., but are backed by various assets on the Terra network. Right now there are about a dozen stocks and a handful of other cryptos you can buy. One important thing to remember is that because these are synthetic stocks, you don't get any dividends. 

The simplest way to use Mirror is to just buy and sell stocks. You can also borrow stocks - this is how they issue new mAssets. You put up UST, aUST, LUNA, ANC, MIR (Mirror's governance token), or any other mAsset as collateral and then borrow whatever mAsset you want against it. You pay no interest to borrow, but you have to maintain your LTV ratio or you'll get liquidated. If you've been following Flare, this is the same way that F-assets are minted. I'm not a stock guy, but I think you pay a pretty stiff interest rate to short a stock from a broker. If you want to go short, this seems like a great way to do it.

The other reason you might want to borrow a stock is to farm it. A big part of Mirror is their long farms where you farm an mAsset against UST. The long farms are like any other liquidity pool, you put up equal dollar amounts of the mAsset and UST so that people can use the pool to swap assets. Pool rewards are paid in MIR, which you have to claim from time to time. Just like ANC, you can stake MIR, put it into it's own pool with UST, use it to vote, or just sell it when you get it. If you borrow the mAsset that you put into the pool, then you can basically just farm the pool yield - you don't care whether it goes up or down (this is called being delta neutral) because if you borrowed 5 shares you have to return 5 shares regardless of whether those shares are worth $10 or $1 when you return them. Just remember, that in long pools you are still exposed to impermanent loss and the amount of mAssets and dollars in the pool is constantly changing so you're not going to get the same amount of each out as you put in. For this reason I personally wouldn't farm crypto mAssets against the dollar - they're just too volatile. Stocks tend to be less volatile.

But wait, there's more. Instead of just borrowing a stock, you can short farm it. Short farming actually works the same as borrowing, you don't put in half of each asset like you do with long farming. Instead you just put in your collateral and then borrow against it like you would for a regular borrow. The one difference is that as soon as you borrow it, the stock gets sold (shorted) and you get the UST that it's sold for. One catch is, the UST is locked up for 15 days (or until you close out your position by repaying all the borrowed stock). So if you're looking to short and buy something else that you're long on, this probably won't work for you. But if you're just looking to do a delta neutral farming strategy, this may work. It just has a higher upfront buy-in cost because it locks up a chunk of your funds for 15 days, but you earn both short and long farming rewards on your delta neutral strategy. To do this you go into the short pool, then buy the same amount of stock that you've borrowed and use it with the corresponding value of UST to go into the long pool for the same stock. The short pool yield rate is only paid on the amount of stock you've borrowed, not your collateral. The long pool yield rate is paid on the full amount (both mAsset and UST) that you put into the pool. Oh, yet another thing, you can only manage your short pool position while the stock markets are open (longs are anytime). So be careful if you think you may need to liquidate your position quickly. One advantage of the short pool is that, unlike the long pool, there's no impermanent loss.

I've decided to go all out. For example if I want to invest 4000 UST (make sure you have more than 4000 because there are fees and premiums), I'll first convert half of that to aUST because I can use that as collateral in the short pool and earn interest on it at the same time (but long pools are UST only). So I'll put my $2000 worth of aUST in the short pool to borrow $1000 worth of say mAAPL. Then I'll use $1000-ish UST to buy the same amount of mAAPL that I just borrowed. I then put that in the long pool with a matching dollar amount of UST. I've found it's helpful to do this on a few stocks rather than just one because the yield rates and impermanent loss accrued in the long farm constantly change - I'd rather spread that out than try to pick a winner. As with Anchor, I just sell my MIR rewards when it's convenient to do so. I've found that if I try to hop around and switch from farm to farm, fees eat me up. Right now I'm trying to just pick my positions and stay there (maybe rebalance as needed) and save up until I have enough to do the same thing for another stock.

This is very complicated with a lot of moving parts. If you want to try it, I highly suggest you start small until you're sure you've got all the steps down and know what you're doing. Here's a video that explains it:

 

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3 hours ago, brianwalden said:

My plan when the market goes south is to repay what I've borrowed, convert all my bLUNA back to UST and just stick that in earn so I get 20% with no risk.

That sounds appealing to me but I don’t believe you that it’s no risk.  :) 

So on reflection if it’s 20% return for a straight deposit of funds I might be better off staying in the more traditional finance type high risk investments.

I realise each appetite for risk varies across folks,  and also across time,  so this is no way a criticism of those bolder than me.

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3 minutes ago, BillyOckham said:

That sounds appealing to me but I don’t believe you that it’s no risk.  :) 

So on reflection if it’s 20% return for a straight deposit of funds I might be better off staying in the more traditional finance type high risk investments.

I realise each appetite for risk varies across folks,  and also across time,  so this is no way a criticism of those bolder than me.

You're right, it's not no risk. You're trusting the Terra ledger and the Anchor dapp and UST to hold its peg. And if you're not American it sucks because The US is printing money. But your deposit isn't at risk (unless one of the above malfunctions) and your deposit is pegged to a "stable" fiat.

Everyone should assess their own taste for risk.

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The Pylon Protocol isn't fully released yet, but as far as I can tell it aims to be a way to make recurring payments without having to pay money. Say, for example, you have a subscription that's $10 per month ($120 per year). Instead of just paying each month or year you could put up $600 and not have to worry about it. The interest your principle earns will pay the $10 monthly fee, and you can quit anytime you want and withdraw your full $600. You're basically paying with the opportunity cost of your money rather than the principle itself.

It looks like Pylon hasn't fully launched yet, right now it just offers to put money into various pools to earn their native token MINE. I haven't used them so I can't really comment.

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Ape Board is a neat little cross-network dashboard. It shows several blockchains, not just Terra. It's a simple idea, you just put in your public addresses, there are no transactions that can be performed from the page. But you get all of your various investments all on one screen. It's very helpful if you're spread out acress multiple apps on a network or multiple networks. I've found the desktop version is better than the mobile version, which loses information.

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The Spectrum Protocol is still in soft launch and has big warnings on the top of its site that its audit hasn't been completed yet and you're basically using it at your own risk. I can't recommend using it.

But I'm kinda getting into degen mode and I'm using it for my Mirror long pools. They're basically a yield optimizer for Mirror. Right now they only offer long pools, and not yet for every asset that Mirror offers. So instead of everyone individually going into Mirror pools, you use Spectrum to collectively go in together. They automatically collect the MIR that's earned every so often and then you have the choice to either have them reinvest it into the pool, or stake it with Mirror. Rewards are paid out in their governance token, SPEC.

They also have a SPEC/UST pool currently paying out over 1000%. I tried it but found SPEC to be too volatile for my tastes. The past couple of days it's been going up and the pool would have been a very good investment, but I'm staying away for the time being.

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Am currently in polwantsacracker on Polygon network. Check it out! Remember the nirvana track? Anyway I only have a few hundred bucks in Lithium-Matic Pool. So far the lithium asset has been performing very well but one of those that could tank at any minute. All good fun.

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I just got out of farming synthetic stocks. The impermanent loss was eating up all my gains. I'm trying my hand at farming LUNA-bLUNA. bLUNA is staked LUNA which takes 3 weeks to unstake... unless you trade it for LUNA. I'm hoping that since the two are pegged to the same price with just a premium added to bLUNA since you're getting around the 3 week wait, they won't be very volatile against each other.

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