New protocols are launching every single day on completely different networks within the crypto area and the development is more likely to proceed via this yr. When trying on the prime 5 networks by whole worth locked (TVL) — Ethereum (ETH), Terra (LUNA), Binance Good Chain (BSC), Avalanche (AVAX) and Solana (SOL) — according to information from DeFiLlama, Ethereum have 579 protocols (together with L1 and L2); Terra has 25, BSC has 348, Avalanche and Solana have 187 and 64 protocols, respectively. The low variety of protocols and excessive TVL from Terra absolutely stand out because the outlier right here.
Terra’s TVL reached an all-time excessive at $20 billion in December 2021 earlier than dropping to $13 billion through the January 2022 crash. So far, the ecosystem has managed to spice up its liquidity again to $26 billion.
With solely 25 protocols constructed on the chain, Terra has attracted sufficient TVL to change into the second largest community after Ethereum. The current announcement of backing UST (Terra’s stablecoin) with $1 billion value of Bitcoin (BTC) reserves and the Mars protocol launch coincide properly with the sudden rise in LUNA value on the finish of February 2022.
The rise within the chain’s governance token is commonly a sign of confidence within the community and the protocols, however does a brand new protocol launch all the time add worth to the community and stimulate person exercise and engagement?
Let’s check out how the worth of LUNA modified when new protocols launched on Terra; then examine how probably the most just lately launched Mars and Astroport protocols impacted native token costs, person engagement and LUNA value.
LUNA is the device that ensures the UST-USD peg
Earlier than trying into the correlation between LUNA value and the brand new protocol launch, it is very important perceive the LUNA-UST mechanism that ensures the peg of stablecoin UST to USD.
LUNA is used as a counterpart to UST to take care of the worth peg of UST to USD. When UST is value greater than $1, it means there’s a higher demand for UST than the availability within the Terra ecosystem. So the protocol incentivizes individuals to burn LUNA and mint UST to satisfy the growing demand for UST till the worth of 1 UST is the same as $1. Quite the opposite, when UST’s value is decrease than $1, the availability of UST is bigger than the demand so UST can be burnt and LUNA can be minted till UST’s worth reaches $1 once more.
By regulating the availability of LUNA within the ecosystem, Terra can successfully preserve UST pegged to USD. This mechanism additionally causes LUNA’s value to extend because the demand for UST will increase.
LUNA value is very correlated with new protocol launches
Fairly often through the preliminary pre-launch phases of a brand new protocol, there’s a sudden improve in demand for UST. It is because individuals want to get hold of airdrop incentive tokens from the brand new protocol and they’re typically requested to lock up UST to offer sufficient liquidity for the protocol when it launches.
The growing demand in UST from individuals throughout pre-launch phases of the brand new protocol causes extra UST to be minted and extra LUNA to be burnt, leading to a sudden improve in LUNA value throughout these pre-launch phases.
Right here is an instance of the just lately launched Mars protocol, the place LUNA value jumped from sub $50 to over $60 in two days proper after the brand new protocol pre-launch phases began.
Right here is one other instance of how LUNA value went up from sub $60 to over $90 in December 2021 proper after Astroport’s pre-launch phases began.
The brand new protocol launch up to now two current instances did assist push up LUNA’s value, which might be seen as a optimistic impact on the Terra community. However to know whether or not they add worth to the Terra ecosystem, one must additionally take a look at the protocol’s token value and person engagements after the launch.
ASTRO value and quantity after the launch
Astroport amassed $90 million within the lockdrop, however the token value of ASTRO has skilled a downturn after the launch of the protocol because of the bearish market surroundings initially of 2022. The worth has picked up because the starting of March and now could be buying and selling its launch valuation.
The each day variety of swaps on Astroport has been steadily growing because the launch for about three months, indicating lively person engagement on the platform after the airdrop.
The overall buying and selling quantity transacted on Astroport has additionally proven a robust growing development because the launch, which peaked in the course of March.
The Astroport launch was profitable and the publish launch information additionally present that the platform has been in a position to keep person actions and engagements. The story of Mars protocol is nonetheless fairly completely different.
Mars value and quantity after the launch
Instantly after the Mars launch on March 7, 2022, MARS token value dropped off a cliff inside an hour from 1.65 UST to 0.7 UST. That is very completely different from the worth response proper after Astroport’s launch. So what occurred to MARS?
It seems that the protocol couldn’t load efficiently within the net browser on the time when it was scheduled to go dwell on March 7, 2022, 11 am GMT. Customers who tried to say the airdrop tokens via the protocol’s web site failed to take action and needed to wait till the web site grew to become purposeful.
Nonetheless, refined customers who knew how you can work together with the Terra chain straight referred to as the declare rewards methodology on Terra station and managed to say MARS forward of the non-tech savvy customers. They dumped the tokens instantly available in the market, inflicting an instantaneous drop in value.
To clarify a bit extra intimately how one may declare MARS by interacting with Terra chain, the investor first must know Mars protocol’s airdrop contract tackle, which is publicly out there on etfinder; then they should know which methodology within the code to name on Terra Station to say the rewards, which is the difficult half.
For the reason that protocol simply launched, the code is commonly not out there within the public area for folks to search out the declare methodology. However a wild guess many of the tech-savvy buyers had was that Mars protocol was forked from Astroport. So the declare methodology was extremely doubtless the identical as Astroport’s. It turned out to be true and these buyers managed to say the MARS airdrop utilizing the identical perform “claim_rewards_and_unlock” on the chain.
Three hours after the official launch time, Mars protocol’s web site was nonetheless not functioning and the airdrop MARS nonetheless couldn’t be claimed from the web site. The worth of MARS had already dropped to $0.64 from $1.65 — a 60% drop in three hours and nothing may very well be completed if the investor didn’t know how you can work together with Terra chain.
Protocol continues to be not working… and $MARS are getting dumped like trash…
— E.Hu (@elenahoolu) March 7, 2022
Let’s take a look on the two main merchandise on Mars protocol proper after the launch. Purple Financial institution, the saving and lending area, has failed to take care of person engagements after the airdrop. The variety of transactions peaked on the third day after the launch to nearly 5,000 a day and has been dropping since then. The each day quantity in USD has additionally been lowering since day 1 from $212 million to $13 million as of March 27.
Fields is the area in Mars protocol for yield farming methods the place customers can present liquidity to ANC-UST, LUNA-UST and MIR-UST. Fields’ historic transaction and quantity after the launch present the same story. The product struggles to take care of the identical degree of exercise because the launch day and the variety of transactions is 1/8 of what it was on the peak whereas the amount in USD is lower than 1/30 of the launch day.
Though it’s not sure that the incident on the launch affected Mars protocol’s person engagements and confidence, the info exhibits the protocol has been struggling to draw volumes and actions because the launch.
A brand new protocol launch doesn’t essentially all the time add worth to the community, as proven within the comparability between Astroport and Mars, which have very related pre-launch methods however very completely different outcomes publish launch.
Incidents on the launch day jeopardize not solely the protocol, however may additionally have an effect on person confidence within the ecosystem. An airdrop incident permitting solely the tech savvy buyers to say first will drive away the overwhelming majority of future buyers. New protocols launching on Terra chain sooner or later ought to make higher efforts to stop such incidents, in any other case buyers’ long-term pursuits and trusts may evaporate before one may think about.
The views and opinions expressed listed below are solely these of the creator and don’t essentially mirror the views of Cointelegraph.com. Each funding and buying and selling transfer entails danger, you must conduct your personal analysis when making a call.
