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What Is Terra 2.0? Can It Help LUNA Recover?

Terra (LUNA-USD) developers are getting ready to release a Terra 2.0 network following a successful proposal
The 2.0 network is part of founder Do Kwon’s “Terra Revival Plan”
A test network is live for the 2.0 platform, with …

  • Terra (LUNA-USD) developers are getting ready to release a Terra 2.0 network following a successful proposal
  • The 2.0 network is part of founder Do Kwon’s “Terra Revival Plan”
  • A test network is live for the 2.0 platform, with a plan to release the main network by the end of the week

Source: David Sandron / Shutterstock.com

Terra’s (LUNA-USD) developers are in the hot seat right now. After a spectacular collapse at the beginning of the month, the project has led to some major losses among large LUNA holders. As a result, investors are placing a lot of scrutiny on the project’s recovery proposal. In the coming days, these developers will hopefully prove successful in executing the recovery plan, starting with the Terra 2.0 launch.

LUNA’s collapse is one of the most spectacular failures in crypto. Last fall, the project became a major hit, joining the top 10 largest currencies by market capitalization. The layer-1 seemed too big to fail, with a totally unique model for its TerraUSD (UST-USD) stablecoin. However, this unique model ended up being the ultimate weak point for the network.

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Earlier in May, UST de-pegged from its $1 price point and could not recover. The volatility spread to LUNA, whose supply is linked with UST. Both cryptos exchanged losses until ultimately, UST dropped to 15 cents and LUNA plummeted to a fraction of a penny.

In the wake of this collapse, Terra’s development team has been trying to save the network and get it back on track toward being one of the world’s largest cryptos again. The way they are doing that is through an ecosystem revival plan. The proposal seeks to create a second network in order to restore the first, allowing each one to prioritize either users or developers.

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What Is Terra 2.0? How Is It Different?

After seeing the proposal passed in a split vote, Terra 2.0 is the definite next step for the ecosystem. But what is it, and how will it differ from the original?

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With the vote approved, developers are wasting no time activating a test network for the new blockchain. It won’t be a long test, either; the Terra 2.0 chain will be ready for a main network launch in just two days, on May 27.

The most glaring difference between Terra 2.0 and the previous chain — renamed Terra Classic — is that Terra 2.0 will not include an algorithmic stablecoin. This makes total sense, of course. Since UST’s collapse, many people in the industry are calling the technology into question as a viable stablecoin model. Rather, it will operate solely with a new LUNA crypto. The old LUNA will rebrand into LUNC.

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A prominent validator on Terra, Orbital Command says that 70% of the new LUNA tokens will be airdropped. All holders of LUNA or UST will receive tokens in this airdrop, though holders who owned their LUNA and UST before the collapse of the network will be receiving a greater ratio of tokens.

Moreover, they share that the Terra 2.0 chain already has a robust product offering, with 11 projects confirmed for the new ecosystem. The hope is that Terra 2.0 will assume Terra’s previous role as the centerpiece of the Cosmos (ATOM-USD) blockchain ecosystem.

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As the launch approaches, some exchanges are showing their support. The HitBTC exchange will be one of the first to list the revamped LUNA crypto on its floor, starting Friday.

On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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