LUNA is a support act for “main event” UST
Terra (LUNA) and TerraUSD (UST) share much of their DNA together and the two are integral to how each works. UST is a stablecoin, a type of cryptocurrency whose value is connected to the price development of other assets like fiat currencies or commodities. TerraUSD, much like some of the other popular stablecoins like Tether (USDT) is pegged to the U.S. dollar. Unlike Tether, however, Terra's coin maintains its peg not from a reserve of assets but from an algorithm that automatically sacrifices ("burns") LUNA tokens to create new UST coins. Simply put, Terra exists to provide stability for UST. This automated system, so its creators claim, should possibly keep the price of its stablecoin steadier than the price change of most other cryptocurrencies. This is a big deal for Decentralized Finance or DeFi, as some of the most valued segments in DeFi rely on price stability to function.Terra plays a major role in the popular Anchor Protocol
Another reason that explains Terra’s rise to prominence is the growth of one of the applications built within its blockchain: Anchor Protocol. This decentralized crypto lending platform saw its TVL (total value locked) – or how much money was staked in it - grow by about 50 percent within a month in 2022. The platform stood out for many people due to its promise to hand out a stable interest rate of nearly 20 percent for those looking to invest their cryptocurrencies - a percentage described by some as "a benchmark yield for the whole industry" – turning it into one of the largest DeFi platforms based on market cap.
