# Luna token value capture

**Published by:** [nhmwdar](https://paragraph.com/@nhmwdar/)
**Published on:** 2021-10-18
**URL:** https://paragraph.com/@nhmwdar/luna-token-value-capture

## Content

As the core token of Terra, Luna has three main functions for token holders: ● Governance tokens: used to initiate proposals, and to vote on proposals such as adjustments to important parameters and rules of the agreement, and funding sponsorship ● Staking to get rewards: By staking Luna to the verification node, you can get the gas fee, stable currency tax and Luna minting of the Terra network ● Minting assets: Users who want to mint new Terra stablecoins must be done through Luna. This action is a bit similar to converting Luna into stablecoins. This process is called seigniorage. The Luna consumed by the current minting will be unified into the community Community Pool. According to the official plan, Luna in the community pool will be destroyed after Terra Protocol’s Columbus-5 mainnet goes online. In addition, when the Terra Station, the official wallet client of Terra, exchanges Terra for Luna through the built-in Terra Swap function, the commission generated will also be used to repurchase Luna, which will be distributed to the nodes as income. Luna is very important to the Terra protocol and has two main functions: ● It is the underlying asset of the POS mechanism. Luna is similar to the computing power of the POW mechanism in the POS mechanism, providing the lowest level of security for Terra's network through asset pledges ● It is the stable price source of system stablecoins such as UST, which absorbs the fluctuation of stablecoins and prevents stablecoins from falling out of anchor. This article will be detailed in the stablecoin mechanism section. For Terra Protocol, the higher the market value of Luna, the higher the ceiling of the liquidity scale of its stable currency, and the lower the security of its network and the probability of de-anchorage of the stable currency. On the contrary, if the market value of Luna is too small, it will There is insufficient energy to ensure the security of the system, and it may even happen that the total market value of Luna falls below the total market value of stablecoins in the Terra network, causing the stablecoins to fall out of the anchor under the run. It is precisely because of this that Terra will spare no effort to empower Luna to improve its intrinsic value.

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