Terra blockchain ecosystem collapse forces talent migration

At the peak of the 2022 bull market, the Terra ecosystem thrives on talent and innovation. The native token of the Terra blockchain has been among the top 10 cryptocurrencies by total market capitalization. The protocol is building the next iteration of a hyperloop that seems to never end.

Terraform Labs created Terra in the 2018 crypto market crash and built it in a bear market. The main attraction and glory of the Terra ecosystem comes from the best yields they offer in Decentralized Finance (DeFi), with stablecoins yielding up to 20% through the Anchor protocol.

As of March 2022, there are 73 projects in the Terra ecosystem. The team aims to add at least 87 more projects by the end of the year. Terra is emerging as a serious competitor to BNB Chain, Solana, Cardano, Avalanche and other layer 1 blockchain infrastructure seeking to gain market share from current leader Ethereum.

As a blockchain built on the Cosmos network, Terra can scale and interoperate with other blockchains through the Inter-Blockchain Communication Protocol (IBC). The bull market hype attracts liquidity, and Terra benefits from users’ appetite for new opportunities in the market.

By May 2022, Terra has reached over 90% of the total value locked (TVL) of all Cosmos blockchains, with assets worth over $21 billion.

That same May will be remembered as Terra’s debacle. Terra tokens should remain pegged to the Terra algorithmic stablecoin – until it doesn’t. In just a few days, billions of dollars were wiped from the market, and the thriving ecosystem that Terra built was put on hold.

related: what happened? Terra debacle exposes flaws plaguing the crypto industry

The community acted quickly. While no attempt was made to restore Terra coin and its failed peg and stablecoin, a new network was created to try to compensate those affected by the crash, not all, but more symbolically to show that the community can have How much flexibility is in Web3.

There are three different trading tokens to consider in the market right now: Terra (LUNA) which is the token of the new network, Luna Classic (LUNC) which is how tokens are renamed after the creation of the new network, and TerraUSD Classic (USTC ) The failed algorithmic stablecoin, formerly known as UST.

Currently, LUNC has a market cap of $2.8 billion, while LUNA has a market cap of just over $303 million. The market cap of the new Terra blockchain is lower than the failed USTC at $415 million.

Where did the people go after Terra collapsed?

Suddenly, with no time to prepare, those projects that choose to build on Terra face a difficult decision that has never happened on this scale or severity to date.

Attempt to compensate projects through Terra 2.0 by providing much-needed liquidity to those affected. The grants were distributed on June 17, with half of the tokens available that day, with the remaining tokens remaining locked up for a linear vesting period of three to six months.

For remaining projects, the Terra 2.0 emergency builder allocation program will unlock a new round of tokens for 35 projects. On September 17, Neptune Financial will receive a maximum amount of LUNA worth nearly $185,000.

Linear vesting dates for the Terra 2.0 Emergency Builder Allocation program. Source: Coinhall

The final set of 15 projects in the program will receive tokens on December 17th, with Astroport unlocking the most with $1.25 million worth of LUNA and Leap Wallet with the least amount of tokens at current market prices with $235,000 worth of LUNA .

Since Terra is built on the Cosmos network, it is a natural migration choice for some protocols. The IBC architecture enables projects to stay in this ecosystem and easily migrate to new blockchains.

Not every project found the idea of ​​staying in Cosmos appealing, as other blockchains started using developer funding to attract talent and new projects to their networks.

With the Ethereum merger just around the corner, blockchains compatible with the Ethereum Virtual Machine (EVM) are outperforming other blockchains.

Polygon is an Ethereum sidechain that has successfully joined over 48 projects from the Terra ecosystem through Polygon’s multi-million dollar Terra Developer Fund. An effective strategy for attracting talent emerged unexpectedly when Terra collapsed in May.

The BNB Chain, an EVM-compatible blockchain created by Binance, is also committed to providing investment and support for projects considered to be migrating from the Terra ecosystem, the fund has $1 billion in investments and grants for deployment in projects are allocated in the BNB Chain ecosystem.

Other networks such as VeChain and Kadena have tried unsuccessfully to take advantage of the talent migration.

Open a new chapter for the surviving project

Lots of great projects and talented people in the ecosystem are driving progress and have good intentions for what they’re building on Terra. From the ashes of collapse, these talented individuals will continue to build and create tools to improve the entire space.

There are currently six projects developing the new Terra ecosystem, and TVL is just over $23 million at the time of writing.

Terra 2 TVL ranking. Source: DefiLlama

Angel Protocol’s founder, Chauncey St. John, told Cointelegraph, “We lost a lot of money, but we have another day to fight and will be restarting in the next few weeks,” adding:

“Angel Protocol has understood the importance of diversification and leaned towards the fact that we can do more as a multi-chain entity. Therefore, we are launching an IBC and EVM compatible hub.”

Lido is the leading Liquid Collateral Derivatives protocol, known for its market dominance in Ethereum liquidity collateral, and it also serves LUNA token holders who want to collateralize with them and maintain liquidity. Following the collapse of Terra, the protocol decided to wind down its operations around LUNA and initiated a shutdown process for this liquid staking token. Lido has no interest in supporting Terra 2.0 liquid staking tokens for the time being.

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