Terra: The DeFi Giant Reaching Mainstream Adoption

Since the start of the year, Terra’s native token LUNA has grown explosively, rising from a $300 million market cap to $6 billion. Was this run deserved?

In this report, I explore the factors driving demand for the Terra ecosystem including overviews of Chai, Mirror, and Anchor, as well as the big picture of what Terra is building.

What drives this explosive growth?

To understand why Terra’s ecosystem has been gaining so much traction recently, we must first understand the team and founding philosophy behind Terra. Terra’s co-founders Do Kwon and Daniel Shin both went through YCombinator which has incubated leading technology companies like Stripe, Airbnb, and Coinbase and understood that user experience and adoption were the most important metrics for projects.

They realized that a big barrier to entry for many newcomers was that too many crypto projects were too technically complex to understand and easily intimidated users. Rather than throwing all the complexity of DeFi at users, they instead wanted to build an ecosystem that offered a user friendly portal into DeFi.

The easiest way to understand Terra is to think of it similar to a traditional bank that facilitates payments, transfers, investments, loans and savings, but automated. It is implemented as a public blockchain and is community owned, community governed, and accessible to anyone in the world with an internet connection. Users enter the ecosystem through Terra stablecoins and access the above banking functions through a suite of apps and protocols. Terra improves on the existing banking model by being globally accessible and non-rent seeking.