Do you still need clarification about what happened to the LUNA token at that time? Or even you still need to learn what LUNA is?
LUNA is the native token of the Terra blockchain, similar to how Ether is used on the Ethereum network. TerraUSD, also known as UST and LUNA, are two tokens on the same network.
Terra is a blockchain network that generates LUNA tokens, similar to Ethereum or Bitcoin. This network was created in 2018 by Do Kwon and Daniel Shin of Terraform Labs.
Terraform Labs makes the UST token an algorithmic stablecoin on the Terra network. If other stablecoins like USDT or Tether are backed by fiat currency. Uniquely, UST is not supported by real currency. Tokens support the value of UST on the same network as LUNA.
Then, what happened to LUNA?
Events on LUNA are caused by being connected to UST, the algorithmic stablecoin of the Terra network.
As of May 7 this year, UST had over $2 billion worth of non-detachable anchor protocols, and hundreds of millions were rapidly liquidating. This raises the question of whether this was in response to an increase in interest rates or a malicious attack on the Terra blockchain.
Then, a big sell-off could bring the UST down from $1 to $0.91. As a result, traders and investors started converting 90 cents of UST into $1 LUNA.
After the number of USTs was lowered, stablecoins also started to fall. In a panic situation, the people who sold the UST led to the printing of more LUNA and a massive increase in the supply of circulating LUNA. Since this crash, many crypto exchanges have started removing the Luna and UST pairs. Later, Luna was abandoned for being worthless, and here was Luna’s downfall.
This incident also impacted the entire crypto market, which was already very volatile and experiencing difficulties. Bitcoin became one of those affected by the LUNA event. The price fell and suffered losses of up to $ 300 billion in the crypto market.
Then, what about the founder of crypto LUNA?
In the aftermath of the LUNA events, Do Kwon hatches a plan to restore LUNA, and things look promising for a short time in May. Terra has finally launched a new token, namely LUNA 2.0.
A few days after the UST and LUNA crashes, Do Kwon shares a plan to revive the Terra ecosystem. A proposal fork opened for the Terra community.
The proposal called “rebirth” explains several changes, such as the new Terra layer-one blockchain without the UST algorithmic stablecoin, the old LUNA name changing to LUNA Classic, and the old UST becoming UST Classic, this proposal was finally approved.
After four months after that incident, on September 15, 2022, to be exact, a South Korean court issued a warrant to arrest Do Kwon due to the huge losses the investors had suffered.
Despite its well-underway recovery efforts, LUNA Classic remains a shell of its former self.
Well, how? Do you already understand what happened to LUNA and how LUNA Classic existed? Keep following Indodax Academy for more exciting information!