At the height of the 2022 bull market, the Terra ecosystem was booming with talent and innovation. The native token of the Terra Blockchain has made its way into the top-10 cryptocurrencies by total market capitalization. Protocols were building the next iteration of a supercycle that seemed like it would never end.
TerraForm Labs created Terra in the midst of the 2018 crypto market crash and made it through a bear market. The main appeal and claim to glory of the Terra ecosystem comes from offering the best returns in Decentralized Finance (DeFi) with up to 20% yield on its stablecoin via the Anchor protocol.
As of March 2022, Terra had a total of 73 projects built in the ecosystem. The team’s ambition was to add at least 87 more projects by the end of the year. Terra BNB Chain was becoming a serious competitor to Solana, Cardano, Avalanche and other layer-1 blockchain infrastructures, which were in their quest to gain market share from current leader Ethereum.
Having a blockchain built on the Cosmos network means that Terra can scale and interoperate with other blockchains via the Interblockchain Communication Protocol (IBC). The bull market hype was attracting liquidity and Terra was benefiting from users’ appetite for new opportunities in the market.
In May 2022, Terra reached over $21 billion in assets, with assets holding over 90% of the total value locked (TVL) of all Cosmos blockchains.
The same month of May will be remembered as the fall of Terra. The Terra Token should have maintained the peg of Terra’s algorithmic stablecoin – until it did. Billions of dollars were wiped out of the market in a matter of days, and the thriving ecosystem that Terra had built was dead.
related: What happened? Terra Debacle exposes the flaws in the crypto industry
The community was quick to act. Although no attempt was made to revive the Terra Token and its failed pegging mechanism into a stablecoin, a new network was created in an attempt to compensate those affected by the crash, not outright but as a symbolic gesture. That’s how resilient a community can be in Web3.
There are now three different trading tokens in the market: the Terra (LUNA) token of the new network, Luna Classic (LUNC), which is how the token was rebranded after the new network was created, and the TerraUSD Classic (USTC) failed. Algorithmic stablecoin formerly known as UST.
Currently, LUNC has a market capitalization of $2.8 billion, while that of LUNA is over $303 million. The market capitalization of the new Terra blockchain is $415 million less than the failed USTC.
Where did the genius go after Terra collapsed?
Suddenly and with no time to prepare, the projects selected to build on Terra were faced with a difficult decision that to date has not occurred before of this scale or severity.
Through Terra 2.0 an attempt was made to compensate the projects by providing much needed liquidity to the affected people. The grant was distributed on 17 June, with half of the tokens available on that date, and the remainder locked in for a linear vesting period of three to six months.
For stalled projects, the Terra 2.0 Emergency Builder Allocation Program will unlock a new round of tokens for 35 projects. On September 17th, Neptune Finance will receive the largest amount of LUNA, valued at approximately $185,000.
The final group of 15 projects for the event will receive tokens on December 17th, Astroport will unlock the most with $1.25 million worth of Luna and Leap Wallet will receive the smallest amount of this group, with $235,000 worth at current market price. Will be Luna
Since Terra was built from within the Cosmos network, it was a natural migration option for some protocols. The IBC architecture enables projects to live within this ecosystem and easily migrate to a new blockchain.
As other blockchains began to use developer grants to attract talent and new projects to their networks, not every project found the idea of living within Cosmos as appealing.
With Ethereum Merge, Ethereum Virtual Machine (EVM) compatible blockchains are outperforming the rest.
Polygon, an Ethereum sidechain, managed to onboard more than 48 projects from the Terra ecosystem through Polygon’s multimillion-dollar Terra Developer Fund. An effective strategy to attract unexpectedly available talent when Terra collapsed in May.
Update: Terra Projects has started the migration. Including over 48 projects and counting… @OnePlanet_NFTa special @0xPolygon market, and @DerbyStars_HQ,
It was awesome to help and welcome all these amazing developers to our thriving ecosystem!
Welcome! $MATIC https://t.co/5ypu1QdMBA pic.twitter.com/JcskdWGnZJ
— Ryan Wyatt (@Fwiz) 8 July 2022
BNB Chain, the EVM-compatible blockchain created by Binance, is also committed to providing investment and support to projects that are believed to be migrating from the BNB Chain Fund to the Terra ecosystem, which has $1 billion in investments and There is a grant to be distributed among projects. Within the BNB Chain ecosystem.
Other networks such as VeChain and Kadena unsuccessfully tried to take advantage of talent migration.
Creating a new chapter for remaining projects
Within the ecosystem there were many great projects and talented people pushing for progress and good intentions in what they were building on Terra. From the ashes of debacle, these geniuses will continue to design and build tools for the betterment of space as a whole.
At the time of writing only six projects are currently developing the new Terra ecosystem with a TVL of over $23 million.
“We have lost a huge chunk of our treasury, but are living to fight for another day and will be back again in the next few weeks,” Angel Protocol founder Chauncey St John told Cointelegraph:
“Angel Protocol has learned the importance of diversification and has leaned into the fact that we can do more as a multi-chain entity. Hence, we are launching both IBC and EVM compatible hubs.”
Lido, the leading liquid staking derivatives protocol known for its market dominance of Ethereum liquid staking, also offered its services to LUNA token holders who wish to stake with them and remain liquid. Following the collapse of Terra, the protocol decided to shut down its operations around LUNA and speed up the shutdown process for this liquid staking token. At the moment Lido has no interest in supporting the Terra 2.0 Liquid Staking token.
