The Terran Manifesto
A spectre is haunting traditional finance - the spectre of Terra Money. While other crypto projects may try to fulfil the dream of Satoshi Nakamoto, they too have their shortcomings and one blockchain must come forward and help realise the Crypto vision: Terra.
While Bitcoin was a great start and a truly world-changing innovation, it today strays farther and farther from the original whitepaper of 2009. No longer is it a peer-to-peer electronic cash system, but a store of value. While it is secure and robust, high transaction fees and a limited transaction throughput put a stop to the dream of a cheap and easy to use digital cash. A secure, stable and decentralized form of programmable money is needed — Introducing UST and Terra Money.
1. Permission-less, programmable money
Terra’s stable coin UST (Terra USD) is permission-less, decentralized and programmable money. It’s adoption will free DeFi (Decentralized Finance) from the shackles of shady centralized stables such as USDT and USDC.
Decentralized Finance is not truly decentralized if it relies on a centralized stable coin. Centralized stable coins can be seized by the issuer at the request of a government or at the will of the issuer.¹ This makes stable coins just as mutable and censorable as regular fiat money - almost defeating the point of DeFi.
Holders of Terra stable coins are holding the superior form of money. Their money can neither be seized nor censored. They do not have to worry about shady companies who may lie about their reserves nor do they have to worry about centralized companies restricting their payments.
Low Fees
Native UST (on the Terra blockchain) will drastically reduce transaction fees compared to other blockchains such as Ethereum which are plagued with exorbitant gas fees as well as compared to traditional methods of making payments.
In East Asia especially, it can be very costly to make digital payments and it can take days for payments to clear and the funds to become available to merchants - Terra fixes this.
Any currency can become a stable on the Terra blockchain, enabling it to be sent instantly and at a fraction of the cost. Payments done through terra can be settled in seconds anywhere in the world.
Whether its a restaurant in Busan receiving KRT (Terra Korean Won) instantly with next-to-no transaction fees or a Bangkok taxi driver receiving payment for his services in THT (Terra Thai Baht) in a matter of seconds instead of having to wait days for his funds to clear, Terra just makes payments easier.
Foreign Exchange made easy
The beauty of Terra’s network of stable coins is how easy it is to swap between them. Terra enables instant and seamless foreign exchange between stables.
Imagine a world where instead of having to go and exchange your money at a ridiculous exchange rate as well as being slapped with fees for doing so, you could just instantly switch between stables from the palm of your hand.
Thanks to Terra, you will never have to set foot at a currency exchange booth again. You can simply go into Terra station and swap between different currencies to your heart’s content with next to no fees and the convenience of never having to go out your way to do so.
Due to these innovations, we truly believe that one day the Terra blockchain will singlehandedly put these foreign exchange desks out of business. No longer will people have to pay ridiculously high fees just to exchange their currency.
High Yield Savings
For far too long have the banks gotten away with utilising our money to earn them huge profits from lending it out at higher interests or simply investing our money into the markets, while giving depositors next-to-nothing in return.
The leading US banks today don’t even offer us 1% APY on our funds², despite the huge profits they post every quarter from exploiting our capital. This is unacceptable. If you were to deposit your money into a bank account, you would lose money to inflation every single year.
Anchor protocol fixes this
Thanks to the relatively new innovation of Proof of Stake (PoS) blockchains, the native tokens on these blockchains are now productive, yield-bearing assets.
These yield-bearing assets can be put up as collateral by those wishing to borrow money. In turn, the yields from the staked collateral are paid to the depositors who are lending the money in the form of a stable APY. Currently Anchor offers a whopping 19.5% APY on UST deposits.
This is over 40 x higher than what most US banks pay their customers in interest today. This yield truly redefines savings as we know it. No longer does saving money mean you have to be at the mercy of inflation and these yields enable longer term planning while giving you more control over your finances.
Getting paid to borrow
On the other side of the protocol, Anchor also enables you to borrow against your crypto and even get paid for doing so!
Although borrower incentives won’t last forever, Anchor currently pays you in the region of a net 15% APR³ for borrowing against your PoS cryptocurrencies. Due to these borrowing yields relying on emissions of the ANC token, they understandably won’t last forever as they are not sustainable. However, in future Anchor will probably shift to interest-free loans after the token emission schedule is concluded.
Why sell your crypto when you can just borrow against it?
Anchor is coming to every PoS chain. You can now borrow against both your Luna and your Ethereum (bLUNA and bETH), and many more forms of collateral are to be added in future. SOL, DOT and ATOM among other yield-bearing assets are all set to be bonded and anchored in future!
In a world where many crypto holders do not want to sell their precious crypto gems, Anchor offers the perfect solution. Instead of selling your crypto in order to cover necessary expenses, you can just borrow against your portfolio. Anchor effectively enables you to live your day-to-day life without ever having to sell.
Diamond hands are made with Anchor.
2. A financial revolution
While UST is arguably the superior form of money, the most exciting aspect of Terra is how it will revolutionise finance forever.
The Terra ecosystem lays the foundations for a completely new financial system that was unthinkable before. A world of high yields and democratized finance that empowers the people who make it up.
The replacement of dividend investing
One of the many exciting opportunities offered by Terra is synthetic stocks via Mirror Protocol. Synthetic stocks such as mAssets on Mirror can effectively kill divided investing, replacing it with higher yields through Liquidity Pooling.
Currently, dividend investing requires you to invest a lot of money in order to make living off of dividends possible. The most prized dividend stocks traded on the market today tend to offer a 3–7% annualized yield⁴ with some exceptions offering at most 10% annually.
While these yields are generally reliable and a great source of passive income if you own enough shares, they pale in comparison to the yields that can be obtained via providing liquidity on Mirror.
Providing liquidity on Mirror has 3 main advantages over traditional dividend investing:
- Higher yields
Providing liquidity on Mirror tends to give a much, much higher yield than regular dividend investing. Long APRs tend to range from 30–40% on average and Short APRs can even go up past 100%.⁵ The yield depends on how many people are providing liquidity, but overall yields are much more favourable when farming with mAssets.
2. You can earn yield regardless of whether you are long or short an asset
With Mirror, you can farm whilst being on both sides of the trade. While with dividend investing you can only be long a stock, short farming enables you to earn yield on tokenized assets while you are shorting them.
This opens up a whole new realm of options to the investor that are not possible in traditional finance. For example: if you are bearish on the overall market and you believe there will be a downturn, you can short the S&P 500 (mSPY) through Mirror whilst earning a yield.
You can currently earn 10.13% annually in yield from shorting the market. This is absolutely game changing. It de-risks your position significantly as well as enabling you to earn.
If you are wrong and the market rallies with the S&P 500 up 12% on the year, no big deal. You are only down 2%. However, if you are right you will reap the rewards from the yield farm as well as gaining from your short position on the overall market.
This isn’t only for the S&P 500, you can farm any asset listed on mirror, even cryptocurrencies such as mETH or mBTC. The possibilities this opens up to investors are huge.
Imagine if Michael Bury could earn yield in his big short of 2007. Maybe it would have covered the recurring payments he had to make to the banks on his credit swaps!
3. You can earn yield on pretty much any asset
The third and final advantage (and arguably one of the most important) that yield farming on Mirror offers over dividend investing is that you can earn yield on pretty much any listed asset.
Gone are the days of searching your broker for obscure stocks, trawling page after page looking for the highest dividend yield. Sure, a particular stock may offer the highest absolute dividend yield, but is it really the one you want to invest in and go long?
With Mirror you don’t have to search for a particular stock that pays dividends. You can earn yield on any asset you please, long or short, regardless of if the company pays out dividends to investors or not - because you aren’t a shareholder, you simply are holding a synthetic version of the stock and betting that the price moves up or down. You might as well earn yield while you are at it.
Through Mirror, Terra has the potential to usher in a new era of passive income investing. An era where actual dividend yield paid by the company is secondary to where you think the price is headed. An era where passive income is the standard for investors.
Spend yields while leaving your initial capital untouched
Being able to deposit money and spend yields is another very exciting innovation brought about by Terra. Whether you are making lossless investments through Pylon gateway or simply depositing money to pay for your Netflix subscription - the concept of paying with yields is ground-breaking.
Introducing Pylon Protocol
Pylon Protocol is a core protocol of the Terra blockchain that serves 2 functions. The first is a launchpad for new projects launching on Terra and the second is that it will enable you to pay for subscriptions by depositing money and spending yields. Both are equally important.
The launchpad enables lossless investing in new projects that are launching on Terra by depositing your UST for a specific lock up period — usually 6 to 18 months. You are then rewarded for the yield your capital would generate through Anchor with tokens of the project you are investing in.
Effectively, you have made a lossless investment by investing your yields while leaving your base capital untouched. An example of this is the $LOOP token launch through Pylon gateway.
You deposit your initial UST investment and it is locked up for a certain time period. The longer the vesting period the higher the APR. This is a great way for Terrans to invest in projects they are bullish on without taking on any risk. Lossless investments at their finest.
Pylon widget
In future, Pylon will release their widget. The pylon widget will integrate seamlessly with subscription service providers and merchants to enable users to deposit money into a pool and pay for subscriptions with the yield generated by their deposit.
For example, say you wish to buy a Netflix subscription for $10 a month. It will cost you $100 / year (billed yearly)
Instead of paying directly for your subscription, you can instead deposit $500 into a Pylon pool. The deposited money will then generate 20% per year in Anchor protocol. The yield from your initial deposit will be used to pay Netflix their $100 per year.
Once you cancel your subscription, you get back your full initial deposit. You have effectively paid for Netflix with your yield, leaving your deposit untouched.
Non-inflationary staking rewards
A simple and clever, yet unappreciated feature of Terra’s native Luna token lies in its well-designed tokenomics. In a nutshell, while the many proof of stake blockchains reward stakers through the expansion of the token supply, the Luna token’s staking rewards are tied to the usage of the Terra blockchain.
Whilst other blockchains, such as Ethereum⁶, may reward stakers / miners through simply creating more tokens out of thin air (inflation). Luna stakers are rewarded through the transaction fees of transactions on the blockchain.
Furthermore, after Colombus-5, all swap fees will be routed to Luna stakers. This subtle yet underappreciated design feature means that Luna staking rewards are inherently sustainable as they come from usage of the Terra network rather than diluting the supply of circulating Luna.
This sustainable source for Luna staking yield positions it as one of the best and most reliable productive assets. Luna holders benefits directly from the growth of the network and do not have to worry about supply dilution.
3. Bringing Crypto adoption to the masses
The beauty of Terra and the majority of the applications that are set to launch on it is that there is 1 key difference that separates them from the majority of blockchain applications: Total addressable market (TAM)
Terra and it’s protocols are designed to be consumer-facing. They are meant to be so simple and easy to use that the majority of users won’t even know they are interacting with the blockchain on the back end.
The consumer-facing and simple nature of the many, many applications set to launch on Terra is crucial to bringing Crypto and DeFi to the masses. While other chains are marketed at the small but growing market of crypto-native users, Terra aims to bring DeFi to everyone.
Alice Finance
Alice is a Venmo / Cashapp style application set to launch in the USA later this year. It is designed to bring the masses into DeFi by offering a user-friendly frontend UI to enable the masses to interact with Anchor protocol on the back end to earn a high yield on their savings.
This application will enable the onboarding of millions of Americans into Terra DeFi. Thanks to the simple User Interface coupled with accessibility and ease of use, most users may not even realise that the app is interacting with a blockchain on the back end.
As well as providing a yield 930 times higher than the national average APY⁷, the Alice application will enable people to send fast and free payments to and from each other at the press of button.
With Cash app having over 36 million users⁸ and Venmo having over 52 million users⁹, there is a huge market for the type of service that Alice offers. Especially when you consider the Industry-leading 9.3% APY that Alice will be offering through integration of Anchor Protocol.
Both Cashapp¹⁰ and Venmo¹¹ do not offer any yield on balances held in their respective applications, giving Alice and other Terra-based applications a huge competitive edge.
Alice and other applications like it (such as Tiik in Australia and Astral in Europe) have the potential to truly onboard the masses into Decentralized Finance in a way that no other crypto project ever achieved.
Banking the Unbanked
Alice is just one of the many applications that will bring DeFi to the masses, another is Kash. Kash is similar to Alice but it has a different target market and a different goal — to bank the unbanked.
Currently, many people live in developing countries who do not have access to banking or a stable currency. Whether they are unfortunate enough to live in a country where hyperinflation is rampant, eroding local purchasing power and discouraging saving or they simply lack access to banking infrastructure many people are in need of a banking solution that enables them to save and invest in a stable currency such as the US dollar.
The kash application has 3 main functionalities:
Payments, Savings and Investments
Payments - Kash will enable peer-to-peer payments between Kash users and terra wallet holders as well as enabling card payments in Q3 and Q4. Revolut-style Virtual cards are set to roll out in September with physical cards later this year or early next year. In developing countries, legacy payment rails tend to be slow and the global average for settlement times is 2–3 days.¹² Instant payments will make it a lot easier for people in less developed parts of the world to transact.
Savings - Kash will offer customers access to a high-yield savings account powered by Anchor. This is absolutely game changing for those living without banking access or in hyperinflationary environments. Not only does it offer them a place to save in a stable foreign currency but it also offers an industry-leading 20% yield to those who need it most.
Investments - Thanks to an integration with Mirror Protocol, users will be able to invest in popular US equities as well as cryptocurrencies and certain foreign equities. This will empower people in emerging economies to invest for the long term and improve their financial situations.
Due to stringent regulations, most of the developing world do not have access to foreign markets. Only the wealthiest have the resources to get access to global financial markets, this integration will democratize investing and make it accessible to everyone. Mirror protocol is most popular in Thailand for this specific reason - it empowers anybody to be able to invest and grow their capital.
4. Conclusion
In conclusion, Terra is a very promising project. It has the potential to not only change Crypto, but disrupt Traditional Finance and change it forever.
Terra will usher in an era of higher yields and reinvent the very fabric of finance as we know it. Whether it is the concept of depositing money and spending yields or a new golden era for passive yield investing, Terra will leave a lasting legacy.
Through the adoption of UST and terra stables we can finally fulfil the dream of Satoshi Nakamoto and realise his vision of a decentralized, peer-to-peer electronic cash system and we can truly bring crypto adoption to the masses.
¹ Source: https://www.theblockcrypto.com/daily/76470/stablecoins-blacklist-explainer
² Source: https://www.bankrate.com/banking/savings/rates/
³ Source: Anchor webapp -https://app.anchorprotocol.com/borrow. Net borrow APRs can be viewed in real time through the webapp
⁴ Source: https://www.nerdwallet.com/article/investing/how-to-invest-dividend-stocks
⁵ Source: https://terra.mirror.finance/farm. Yields are variable and change depending on how much total liquidity has been provided to a particular pool.
⁶ Source: https://www.finder.com/ethereum-inflation-rate
⁷ Source: https://www.alice.co/
⁸Source: https://www.businessofapps.com/data/cash-app-statistics/
⁹Source: https://www.businessofapps.com/data/venmo-statistics/
¹⁰ Source: https://cash.app/legal/us/en-us/cash-lsb-terms
¹¹ Source: https://productmint.com/the-venmo-business-model-how-does-venmo-make-money/
¹² Source: Kash Corporate Presentation - https://57e8ee36-7a8c-4b7e-a05c-c143ce7275f8.filesusr.com/ugd/5723b6_9f3e212e0b78426881e07df37e6e2cf0.pdf
