Luna classic (LUNC)

Luna classic (LUNC)

Luna classic (LUNC) is the native token of the original Terra blockchain, which was launched in 2018. At that time, the token's name was LUNA. After the collapse of the blockchain's algorithmic stablecoin, TerraUSD (UST), in May 2022, the community voted to create a new blockchain.

After the launch of "Terra 2," the native token of the new network adopted the name LUNA, while the token of the old blockchain was renamed Luna Classic (LUNC).

The goal of Terra Labs, the company that developed the coins, is that the protocols and applications of the former network migrate to the new blockchain (Terra 2). But as of June 2022, the future usefulness of the original Terra blockchain is uncertain.

Luna classic price

In May 2022, the highest price of LUNC was $119.02 (when it was the old LUNA token), recorded in April 2022. The token went from a few dollars to over $100 in less than a year, becoming one of the top 10 cryptocurrencies by market cap as continued demand for Terra's stablecoin led to dwindling LUNC supply.

The main driver of demand was Anchor, Terra's revenue-generating platform, which offered stunning, but ultimately unsustainable, annual rewards on UST deposits of up to 20%. When deposits on Anchor reached $14 billion in UST in April 2022, the circulation of legacy LUNA tokens fell below 400 million tokens for the first time.

In early May 2022, the UST price deviated from the $1 mark, and investors began to flee Anchor, which had been driving the most demand for UST. Actions to restore price pegging proved short-lived, and the UST lost its price peg again during the week of May 9, 2022, eventually falling to pennies. The collapse of UST and the rush of banks to Anchor drove the original LUNA into a hyperinflationary cycle, and the token's price fell to cents.

How does Luna Classic work?

Luna classic was created as a native token for the original Terra blockchain. It acted as a twin token that would catch any price deviation from the blockchain's algorithmic stablecoin, TerraUSD (UST). UST was intended to maintain a one-to-one exchange rate with the U.S. dollar by creating (minting) and burning (destroying) UST tokens to balance the stablecoin's supply and demand at a $1 price.

Many considered the concept inherently unstable and vulnerable to attack. UST and LUNC eventually collapsed in the first half of May 2022, wiping out billions of dollars in investments from average retail investors and reputable institutions.

Key Events and Management

In early 2018, Do Kwon and Daniel Shin founded Terra Network with plans to develop an e-commerce payment app using a price-stable cryptocurrency.

In July 2021, the company received $150 million from investors including Arrington XRP Capital, Pantera Capital, Galaxy Digital, and BlockTower Capital. The funding went to the Terra Ecosystem Fund, which funds projects on the Terra blockchain. Previously, the company raised $25 million in January of the same year.

In September 2021, Kwon was served with a subpoena by the U.S. Securities and Exchange Commission asking him to testify about Terra's mirror protocol. The following month, he and his company sued the SEC, claiming that the subpoena was not properly served and that the SEC failed to keep its investigation confidential because Kwon was subpoenaed in person at a conference.

In early 2022, the Luna Foundation Guard (LFG) was launched, an organization designed to create a foreign exchange reserve for the UST in the event of a severe crisis in the exchange rate. The LFG emerged as a significant and high-profile buyer of Bitcoin, amassing $3.5 billion worth of cryptocurrencies in its reserve (mostly in Bitcoin).

On May 8, 2022, the UST price deviated from the $1 peg, and investors began to flee the Anchor, which was the primary driver of UST demand. Measures to restore the price peg proved short-lived, and the UST lost its price peg again during the week of May 9, eventually falling to cents. At the same time, UST's collapse caused LUNC to enter a hyperinflationary cycle and the token's price fell to cents.

Amid the collapse, the Terra blockchain was halted twice to prevent a government attack.

As part of the effort to revive the Terra ecosystem, the community voted to launch a new blockchain called Terra 2. This coin was released in late May 2022. The tokens were distributed to holders of the old LUNA tokens and to holders of UST stablecoins.

The old blockchain (Terra) remained intact, its native LUNA token was renamed Luna Classic (LUNC), and UST remained in circulation.