As you may have seen, we recently collaborated with Flipside Crypto, a leading on-chain analytics firm in the crypto markets, to build a Terra Community Console. The community console is a real-time metrics dashboard for the Terra blockchain, presenting a deluge of important on-chain data points using engaging visuals.
“Flipside’s community console is a significant tool for our community and analysts to understand the flow of transaction data, LUNA staking, and more on the Terra blockchain,” says Terraform Labs Co-Founder and CEO, Do Kwon. “The console is one of Terra’s recent steps in a broader transparency push, and we look forward to engaging further with Flipside about how we can bring more transparency to the Terra ecosystem.”
Flipside’s console metrics are often featured in crypto and traditional media. Recently, data points from Flipside’s blog post about the Terra Community Console were featured in The Street and CoinMarketCap, with the latter denoting the surge in new Terra accounts following the launch of Mirror Protocol.
Feel free to explore the community console at your leisure, but we will also provide a high-level overview here alongside some key insights we noticed out of the gate.
Showcasing Terra Adoption
The console primarily showcases four areas of on-chain activity:
- Ecosystem Usage
- Staking Patterns
- Stakeholder Behavior
Ecosystem usage on Terra can broadly be defined as how transactions, fees, supply, accounts, and staking evolve. Terra’s seignorage-based, algorithmic stablecoin model (where LUNA collateralizes the network’s cadre of stablecoins such as UST) makes ecosystem usage one of the most important areas showcasing the health of the Terra network.
For example, increasing transaction velocity of UST or KRW indicates broader demand for Terra stablecoins as a means of payment. More robust demand for stablecoins like UST induces more minting of UST via swapping LUNA. This reduces the supply of LUNA, provides increasing cash flows for LUNA stakers, and allocates more capital to the ecosystem for development. More attractive LUNA staking and ecosystem capital attract more prospective users and entrepreneurs, manifesting in more Terra accounts and higher staking percentages.
Exogenous events can also have a positive impact on the adoption of stablecoins like UST, which is the spark for the virtuous cycle described above. In particular, ecosystem usage metrics indicate an uptick in the creation of Terra accounts in the wake of the Mirror Protocol launch.
For example, as Rochelle Guillou of Flipside Crypto detailed in her CoinMarketCap piece:
“Terra’s on-chain data shows 2,000 new accounts are created daily. The Terra stablecoins are rapidly gaining traction, now with over 2 million total accounts created. On-chain data reveals there are an average of 63,000 active accounts per day. “
Her sentiment is also reflected in UST’s transaction velocity, which has progressively increased in the past month and is comparably high for a stablecoin. Velocity looks at how many times a token has exchanged hands (user accounts) in a day — as opposed to using the token for investment and trading activity. UST’s velocity metric stands at 61. In comparison, DAI’s is 37; USDC’s is 28; and USDT’s is 22. Access data here.
LUNA stakeholders are the long-term investors in the Terra network. Their behavior indicates sentiment towards Terra stablecoin adoption and the value accrual to stakers in the long-run. As Terra stablecoin adoption increases, LUNA holders are encouraged to stake at higher rates to accrue the fees from transactions on the network and generate cash flows.
Importantly, staking rewards in Terra are not generated via emission, which is common in many other PoS blockchain networks and dilutes the holdings of native token holders. One of the consequences of emission as the primary yield vehicle for PoS network stakers is that they are pushed to stake at higher rates to avoid prolonged dilution of their holdings.
Comparatively, LUNA stakers are paid via fee accrual from stablecoin transactions across this network. At first glance, it would seem that LUNA staking as a percentage of the total supply would be low relative to other PoS networks, but that’s not the case. In fact, LUNA staking equates to 31 percent of the supply, a high mark, especially considering that LUNA holders are not induced to stake due to inflationary supply pressure.
One of the best ways to understand markets is to examine capital flows. On blockchains, such economic data is transparent, which makes perusing on-chain analytics of whales, major stakeholders, and investment firms a treasure trove of information. Applied to Terra, surveying the movement of capital flows from major LUNA stakeholders to exchanges can unmask correlations between long-term sentiment and broader market dynamics.
In particular, we can look at exchange inflows/outflows, which display investor sentiment about a token’s long-term prospects or short-term speculative usage. For Terra, LUNA outflows from exchanges have been on the rise, indicating bullish sentiment from investors and a reduced short-term, speculative use of LUNA.
Basically, most on-chain analytics can be lumped into the nebulous category of economics. However, we can examine economics on Flipside’s community console via the prism of cash flows to LUNA stakeholders — a critical metric for gauging the economic health of Terra’s ecosystem.
As you can see above, average cash flows paid to LUNA stakers (on a daily basis) is $25K, annualizing to roughly $9.5 million and an APY of 9.5 percent.
With the recent Mirror Protocol and upcoming Anchor launch, the demand for UST is expected to increase as UST operates as a gateway to the Anchor savings vehicle and is used as collateral for the CDPs in Mirror. With more UST adoption, cash flows to LUNA stakeholders will increase, reducing the LUNA supply by minting more UST, and making LUNA long-term hodling more attractive, which begets reduced capital inflows to exchanges by major holders.
The virtuous cycle of Terra.
We would like to thank Flipside Crypto for their work on the Terra Community Console and encourage our community to explore the console at their leisure!
As always, please join our communities!
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