● 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.

In June 2017, Matt Hall and John Watkinson created 10,000 unique characters on the Ethereum blockchain. The number of these characters will never change, and no two items are the same. These two creators allowed anyone with access to the Etherum network to claim their creation for free, and CryptoPunks was officially born.

A few months later, CryptoKitties, a game involving transactions and nurturing numbers, was exposed, paving the way for NFT to be recognized outside the blockchain field.

Fast forward four years and you will find that a market attracts 108,000 unique active wallets every day, while generating $5.2 billion in a month.

By 2021, the blockchain industry will show clear signs of continued development. A movement called DeFi (short for decentralized finance) is blooming. The environment surrounding the industry is no longer just about trading cryptocurrencies and embedding blockchain technology into actual business models. The real feeling of getting rid of the middleman is indeed groundbreaking and has successfully attracted the attention of thousands of people.

In addition to worries about financial derivatives and synthetic assets, supervision also has a keen interest in the ever-expanding stable currency market. Some information indicates that the US Securities and Exchange Commission (SEC) may be investigating Tether and Tether Operation Limited. "We have a lot of casinos in the Wild West, and poker chips are these stable coins on the casino table." Gary Gensler believes.

Not only regulatory agencies, as Tether USD, a widely used stablecoin in the crypto world, many people have doubts about the form of reserves behind it.

Earlier this year, Tether disclosed the details of USDT's reserves, of which only 2.6% is in the form of cash reserves, and the rest is a combination of secured loans, corporate bonds, encrypted assets and other investment tools. According to the audit by Moore Cayman, an accounting firm that specializes in providing audit services to the investment fund and digital asset industry, as of June 30, all tokens issued by Tether have sufficient reserves.

In addition, illegal cryptocurrency money laundering activities are also related to DeFi. This area has always been the focus of regulatory agencies.