Fool.com contributor Chris MacDonald and Motley Fool analyst Asit Sharma discuss why Terra Luna (LUNC 2.94%) could be a big winner in the crypto world, as stable coins rise to prominence. This discussion took place on Oct. 27 on "The Crypto Show," part of The Motley Fool's Backstage Pass.
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Asit Sharma: We're at Terra Luna and this token is found under L-U-N-A. This is also a pretty large cap asset, Chris, market capitalization of $16.3 billion. It's little larger than Chainlink (LINK 4.84%), it's the 12th largest crypto. This is a blockchain protocol that uses fiat-pegged stablecoins to power price-stable global payment systems. That's a mouthful.
It affords, or -- it offers price stability of fiat currency, so currency on the real world, plus fast and affordable settlements, which is something that is a problem that's plagued many blockchain technologies. It's just the time it takes for a transaction to be validated and also the associated fees. Terra Luna as a blockchain protocol, is trying to solve both of these problems.
To explain a little bit more about what it achieves: I guess you can think of this asset as big, decentralized financial infrastructure. It's a protocol, but it also has a lot of utility with stablecoins.
What it's trying to do is to hold the stablecoins within its system steady. A stablecoin is a coin, by definition, in nature, that doesn't fluctuate very much in real-time. It uses its own technology to match supply and demand and try to algorithmically keep its stablecoins stable. By doing this, if you think about the way, for me, the way a MasterCard (MA -1.19%) works, it enables cross-border transactions for low fees for merchants.
You could use this technology through its stablecoins and through its native token to achieve the same thing. I think it's got applications for e-commerce, Chris, in
that it's not trying to have an e-commerce or a commerce token that itself is going to fluctuate a lot. It wants to focus to be on the stablecoins within its system.
I think that the network has proven itself to be very efficient. That's one of the reasons why it's seen pretty quick and broad acceptance. What are your thoughts on Terra and the associated token?
Chris MacDonald: I definitely agree. I think the applications in e-commerce, those are potentially very big. I think, being a platform where all these stablecoins can interact with the global economy. I think that's really important for thinking about how crypto can disrupt the financial system.
There could be a range of rather large players that choose to say, "OK, it's..." -- similar to the Microsoft (MSFT -1.84%), ugh, Microsoft. The MasterCard-backed news that we were saying off the top of the show. That these large, whether they're financial companies, what have you, may find the impetus to say: we need to have a stablecoin.
Or think about that, in which platform are we going to use to do that?
Terra is really interesting in that regard and I think it's really building out the plumbing for what could be a rather big stablecoin market. It's just starting to grow right now, but I think it's got a long way to run.
Sharma: Absolutely.
I will say before we move on to the next asset that the stablecoins that Terra LUNA supports include a US dollar stablecoin, so Terra US dollar, UST. It has a euro stablecoin, EUT, a Canadian dollar stablecoin, CAT, and a Japanese yen stablecoin, JPY. You can see the emphasis here on that cross-border payment and trying to cut out the volatility.
