How does Terra work?
Terra is a blockchain-based payment network that enables users to make payments in multiple currencies, including its own stablecoin, TerraUSD.
The network is powered by a consensus algorithm called the Luna Consensus Protocol, which is based on the Tendermint consensus engine. The protocol is designed to ensure that transactions are secure and reliable while also providing low transaction fees. The Terra network consists of two main components: the Terra blockchain and the Terra Stablecoin System (TSS).
The Terra blockchain is a public blockchain that supports smart contracts and allows users to create their own tokens. It also provides a platform for decentralized applications (dApps) and other services. The TSS is a system of stablecoins that are pegged to different fiat currencies, such as the US dollar or Euro.
These stablecoins are used as a medium of exchange on the Terra network and can be used to purchase goods and services or transferred between users. The Luna Consensus Protocol works by having validators stake their tokens in order to participate in consensus. Validators are rewarded for correctly verifying transactions and penalized for incorrect ones.
This incentivizes validators to act honestly and ensures that transactions are processed quickly and securely. In addition, the Terra network also features an inflationary monetary policy which rewards users who hold its native token, LUNA, with newly minted tokens each block. This helps keep transaction fees low while also providing an incentive for users to hold LUNA tokens instead of selling them off immediately after purchase.
