Volatility in the crypto segment is rampant and likely will continue to be. However, there are some tokens intended to create stability in the crypto space. On this Dec. 15 episode of The Crypto Show, The Motley Fool's Eric Bleeker and Chris MacDonald discuss why Terra (LUNC -0.58%) could be an intriguing token to consider in this regard.
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Eric Bleeker: Let's move ahead to the next preview, which is Terra with the token LUNA, price of $56.30, market cap of $21 billion. Bull cases: growing number of applications are being built on top of its blockchain, and what to watch for is rising developer interest and user adoption.
It's most notable projects today, are in DeFi but Metaverse and other applications are being built. On the bear case, within 2022, you'd have the potential for a lack of application momentum. It's complex. Terra is not an easy project to wrap your head around, and that's because prior Stablecoins, which is an aspect of Terra, have failed and it's likely in 2022 we'll continue to fail.
Chris, when we look at Terra, I know this is one of your favorite projects in this space. What are you looking for in the year ahead?
Chris MacDonald: I think that's a really good introduction because Terra is definitely very difficult to understand. The description of it that I think is widely understood is that it's a suite of algorithmic decentralized, stable coins which underpin a thriving ecosystem, bringing DeFi to the masses. That a big mouthful.
What Terra actually has done with LUNA, just to simplify it a little bit, it's a quasi-reserve currency for Stablecoins held within the Terras stables. What Terra LUNA has done it has basically tried to ensure price stability of Stablecoins by minting and burning LUNA and incentivizing users to keep the price of its Stablecoin steady and pegged to the US dollar mainly.
What this means is, Terra and its token LUNA really act more as a fiat currency would, and one of the biggest issues that a lot of people have with crypto is that it's really hard to pay someone in something that might go up or down 10 percent in a given day. You'd like to know that there's going to be some stability with your given currency that you're going to transact with for transactions that are on an ongoing basis over time.
For realistic medium of exchange, Terra has come up with this algorithmic way of stabilizing its currency. I think there's going to be more demand for that in the future.
Like you said, there's a lot of deep DeFi projects that are choosing this platform to be built on top of for reasons. There's that growth aspect with use cases. There's some real utility being created in the DeFi world. And I think there's a lot of inherent utility in having a really stable currency in this day and age, that's one of the reasons why I've been looking a little deeper into Terra of late.
