New future for the surviving projects on Terra

The infamous Terra Collapse caused Web 3.0 projects to move to other ecosystems, but also had the benefit of the discovery of new ways to adjust and repair after similar kinds of unwanted events that might repeat in the future.

The Terra ecosystem flourished with the growth on the bull market during 2022 and there was almost no one in blockchain circles who had never heard of Terra and its native tokens’ great success. At one point, the Terra token was among the 10 top tokens thanks to its market capitalization and its protocols indicating successful growth – growth that most of us thought was unstoppable.

Terra was created by Terraform Labs right after the 2018 market crash, and the ecosystem was built during the following bear market. Yet their first and most famous acknowledgment happened when they started bringing the best gains to their customers on DeFi platforms, with yields up to 20% thanks to their Anchor protocol.

The ecosystem had 73 projects constructed in it by March 2022, and the company projected they would launch almost a hundred more before the beginning of the next year. Terra was on the way to becoming an intimidator to the biggest blockchain gaming players, including the Layer 1 blockchains. The aim of the company was to steal some market share from the champion, Ethereum.

Terra was built on the Cosmos Network and forged ahead of its competitors by attracting interest with its capability of providing communication and scalability with different blockchains thanks to Cosmos Blockchain’s Inter Blockchain Communication Protocol (IBC). At this time, Terra’s assets were providing more than 90% of the total value locked in all Cosmos Blockchains, or USD 21 billion.

Unfortunately, this happened to be the same month that Terra stopped maintaining the peg of Terra’s algorithmic stablecoin and crashed, leaving everyone puzzled. It took just a few days for billions of dollars to be wiped from the market, and was the day that the famous and successful Terra ecosystem failed completely.

A new network was quickly created by the Terra community, even though the token had failed and that there was no way to rescue its value. The new network was aiming to pay back the injured parties, even if this would just be a symbolically small amount of their total losses. It was an indication of the strength of the community and maybe even the communities across Web 3.0.

After the new network was built, LUNA was renamed to LUNC (Luna Classic), with a USD 2.8 billion current market value, while its stablecoin UST became USTC (TerraUSD Classic) with a USD 415 million current market value.

This was an example of something never experienced before in any blockchain project. At least not to this degree. The question remained the state of all the promising projects built on the Terra blockchain. What was going to happen to those projects?

Terra made a move to create liquidity for projects impacted by the collapse, and distributed half the available tokens on 17 June 2022. The other half of the tokens will be distributed in 3 to 6 months’ time.

Under the Terra 2.0 Emergency Builder Allocation program, 35 project tokens are being unlocked and a LUNA token worth USD 185,000 will be transacted for Neptune Finance.

The last group will receive their LUNA tokens on 17 December 2022, and the highest amount from the last group will go to Astroport (USD 1.25 million). Leap Wallet will receive the smallest amount (USD 235,000).

Although the projects that remained in the Terra ecosystem could easily be moved to a new blockchain using the IBC architecture, some projects did not benefit from remaining in the Cosmos Network as other blockchains began to gain momentum with new projects and opportunities.

With the help of the long-awaited Ethereum Merge, blockchains harmonizing with the Ethereum Virtual Machine (EVM) have been attracting interest and it seems they will continue to do so. Ethereum sidechain Polygon is one of those examples, as 48 projects were transferred from Terra to Polygon with the help of the Terra Developer Fund. The Fund was created by Polygon as a strategy to attract talent migrating from Terra after the famous collapse in May.

Binance’s BNB Chain is also an example of an EVM-compatible blockchain, and is aiming to support and invest in projects which are planning to move from the Terra ecosystem. Their BNB Chain Fund has saved USD 1 billion to deliver to the projects which will be stationed in their ecosystem.

Besides these successful examples, there have also been some failed attempts at turning the crisis into an opportunity. VeChain and Kadena are examples of such failures.

What does the new future look like for the surviving projects on Terra?

Before the unexpected collapse, the Terra ecosystem was built and surrounded by innovative and talented people, and the hope is that they will keep on constructing and innovating for the advancement of the ecosystem.

At the time this article was being written, there were six projects on the Terra ecosystem with a TVL value of over USD 23 million.

The founder of the Angel Protocol, Chauncey St. John, said, “We lost a huge chunk of our treasury but live to fight another day and will be relaunching in the next couple of weeks,” adding, “Angel Protocol has learned the importance of diversification and leaned into the fact that we can do more good as a multi-chain entity. As such, we’re launching both IBC and EVM compatible hubs.”

Lido has offered its services to LUNA token holders who want to stake with them and retain their liquidity. Lido is a reputable liquid staking derivatives protocol known for its superiority in the blockchain market.

However, following the collapse of Terra, Lido slowed down its process around LUNA, and followed by ending the process for its liquid staking token. We have not seen any differing statements or moves at the present.