What is LUNA
LUNA is the reserve token current of the stablecoin payment protocol, Terra. Essentially, LUNA tokens are used to help stabilize Terra stablecoins (which are programmed to stay at $1 USD). When the demand for Terra tokens rises, pushing the price per token upwards, the Terra protocol sells LUNA tokens to issue more Terra tokens — thus “minting” more Terra to increase supply and drive the price back down to $1 USD. If the price of Terra tokens drops below $1 USD, then Terra tokens are swapped for LUNA tokens — essentially “burning” Terra token to drive the price of Terra back to $1 USD. The LUNA tokens are what powers Terra’s Proof-of-Stake (PoS) protocol, as miners participating in running the Terra network are required to stake LUNA tokens. Miners, who are required to facilitate transactions on the Terra network, are also rewarded in LUNA for their participation in the form of gas fee, taxes, and other rewards.
