Thread by @pLUNADAO

Here's why $LUNA is - still - undervalued and why YOU should be buying it right now, if you're looking for #financialfreedom💸

A🧵that might just change your life.

1/ $LUNA's financial revolution is closely tied to it's stablecoins. To understand the importance of #stablecoins, you must know that they account for a vast majority of trading volume in #crypto and are of course at the center of putting the #currency back into #cryptocurrency.

2/ Now, on the #terraluna ecosystem there are stablecoins for a lot of different currencies (USD, EUR, CHF, GBP, KRW, etc.) but the currently most integrated and used one is the USD-stablecoin: UST💲

3/ $LUNA's innovation however lies not in the amount of stables, but rather in how they function.

To understand this, we must take a brief look at different type of stablecoins:

- Fiat-backed ( $USDT, $BUSD, $USDC)
-Crypto-backed ( $DAI or $MIM)
-Algorithmic ( $LUNA's stables)

4/ Fiat-backed #stablecoins face the inherent problem that #cryptocurrency is trying to solve in the first place: Trust 🗝

You need to trust that

a) the fiat-backings really exist and that...

5/

b) no centralized entity will make you unable to spend them (Yes, @Tether_to can really do that).

Further, fiat-backed stables face regulatory risk: Government's could #freeze the fiat-backing, effectively making the stablecoin #unbacked😰

6/ Wondering why $USDT is still the no. 1 stablecoin?

Yes, so are we. But we'll get to that 😉

7/ Crypto-backed stablecoins have some advantages over fiat-backed stables, as they do not face the same regulatory risk and they also don't require #trust.

However, crypto-backed stables such as $DAI or $MIM face their own set of struggles...😒

8/ They are necessarily #overcollateralized, since their creation is akin to a #borrowing procedure. That means for every $DAI in existence, there's collateral in excess of the value locked away.

9/ While these sorts of stablecoins have their use case, they will not be able to become prevailing mediums of exchange.

Why not?

10/ It's heavily inefficient. Imagine having to lock away $1,50 for every $1 you spend.

Further, the minting requires borrowers looking to leverage (lend against their collateral). This means the growth of the stablecoin is limited by the amount of new leveragors.

11/ Enter $LUNA's UST 👀... the world's leading decentralized, #algorithmic stablecoin.

Soooo, how does that work?

12/ It's simple, and herein lies the beauty of @terra_money's design:

Want $UST (or any other #Terra-stable)? Just burn $1 worth of $LUNA and you'll get it.

Want your $LUNA back? Just burn your $UST and get $1 worth of $LUNA.

(Don't worry, you and I just buy on exchanges)

13/ The benefits?

- capital-efficient
- no trust required
- no regulatory risk (no centralized entity involved)

In short: It solves all problems of #gen1 and #gen2 stablecoins 👀👀👀

14/ But how is the #peg secured?

Again, it's quite simple really. The algorithm guarantees you'll be able to ALWAYS redeem one $UST for $1 worth of LUNA (and vice versa!).

If...

15/ ... $UST is trading below peg (e.g. $0.9), arbitrageurs are incentivized to burn their $UST for $LUNA and make an instant 10 % gain. By burning UST, supply is decreased until the peg is restored.

If...

16/ ... $UST is trading above peg (e.g. $1.1), arbitrageurs are incentivized to burn their $LUNA for more $UST and make an instant 10 % gain as well. By minting $UST, suppy is increased until the peg is restored.

End result = #pegstrong

17/ If you have paid close attention you might have noticed a crucial detail:

$UST is created by burning $LUNA 🔥

This reduces total (& circulating!) supply, driving up $LUNA prices📈

18/ As the demand for $UST increases, $LUNA supply is continously burning.

That's why @terra_money founder @stablekwon likes to envision a future where only a single $LUNA token will be left (" $LUNA as an NFT")...

Screenshot related...🔥🔥🔥

19/ This sets $LUNA apart from other #cryptos:

Since it's supply is continously being burned, $LUNA can grow in price, without the market cap necessarily going up a corresponding amount.

This means LUNA could x100 from here, without necessarily needing to surpass #ETH or #BTC.

20/ Well... is demand for $UST increasing though?

Yes, yes it is. It's currently printing at its maximum rate of $100mm a day and is fully capped out.

Screenshot shows UST demand in mcap:

21/ At this rate, $UST is headed to be the no. 1 #stablecoin in all of crypto😍

When that happens, "$1000 $LUNA " might be missing a couple of zeros🤯

What are you waiting for, anon?🤝