Terra’s Meteoric Rise in 2022
In the dizzying heights of the 2022 bull market, Terra was the shiny apple in the crypto orchard, boasting a native token that rocketed to the top 10 cryptocurrencies by market capitalization. Founded by Terraform Labs, the Terra blockchain emerged during the crypto market’s 2018 crash and was built up through subsequent bear markets.
The flagship appeal of Terra lay in its jaw-dropping yields — up to 20% on its stablecoin via the Anchor protocol. With a total of 73 projects operational as of March 2022, the ambition was clear: add at least 87 more projects to the portfolio by year-end. Terra’s ambition positioned it as a serious contender against established networks like BNB Chain, Solana, and Avalanche.
A Platform Built for the Future
The unique positioning of Terra on the Cosmos network endowed it with impressive scalability and interoperability convened through the Interblockchain Communication Protocol (IBC). The bullish sentiment of the market penned a welcoming chapter for Terra, which reached a spectacular valuation of $21 billion across its decentralized finance (DeFi) platform by May 2022.
This was an ecosystem that seemed destined for an everlasting future — but oh how the crypto winds can shift!
The Collapse: May 2022
May 2022 will forever be etched in history not for Terra’s triumphs but rather its dramatic downfall. The Terra token’s once-stalwart peg to the algorithmic stablecoin began wobbling, leading to a catastrophic loss of billions in mere days. What once was a flourishing ecosystem crumbled as rapidly as it had risen, leaving remnants of the buzz and energy that had characterized the Terra landscape.
Community Resilience: The Genesis of Terra 2.0
The crypto community, known for its tenacity, wasn’t about to let Terra fade into oblivion without a fight. Although an attempt to revive the original token failed, the community forged ahead with a new project — Terra 2.0. This effort aimed to compensate those impacted by the chaotic collapse, albeit not fully, but as a show of resilient spirit within the Web3 ethos.
- LUNA: The fresh face of the new network.
- Luna Classic (LUNC): The ghost of Terra’s past.
- TerraUSD Classic (USTC): The once-mighty stablecoin that lost its way.
Currently, LUNC boasts a market cap of $2.8 billion, while LUNA sits at a humble $303 million, overshadowed by USTC’s $415 million.
Migration: The Great Developer Exodus
Behind each collapse lies a plethora of talented individuals left in the lurch. Projects that previously depended on Terra faced a tough fork in the road. The debut of Terra 2.0 aimed to offer crucial liquidity and recovery grants to affected projects. Some opted to cling to the familiar Cosmos network, while others cast their nets toward greener pastures.
As Ethereum’s Merge approached and other EVM-compatible blockchains soared, chains like Polygon and BNB Chain capitalized on this sudden glut of available talent.
Ryan Wyatt, a prominent figure in the crypto world, celebrated this influx saying, “It was so awesome to help and welcome all these wonderful developers to our thriving ecosystem!”
Building a New Chapter: Where Do We Go from Here?
Despite the dark clouds hanging over Terra, a spark of innovation ignites among the survivors. Six projects are currently working within the framework of the new Terra ecosystem, amassing a TVL of just over $23 million at the time of writing.
Chauncey St. John, founder of the Angel Protocol, eloquently stated, “We lost a huge chunk of our treasury but live to fight another day.” A sentiment shared across many who are determined to rebuild and thrive in this ever-evolving crypto landscape. Projects like Lido are cautiously revamping strategies, while others remain committed to future growth.
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