Terra Fork: Comparative Documentation of Luna Classic and Luna 2.0
Context and Justifications for the Fork
The Terra fork occurred in response to the collapse of USTC and the massive devaluation of the LUNA token in May 2022. This event destabilized the entire Terra ecosystem, leading developers and the community to consider a fork to separate the original chain (Terra Classic) from the new one (Terra 2.0). The fork aimed to create a new growth opportunity while allowing the community to continue working on the original chain.
Objective of the Comparative Documentation: This documentation aims to inform the community about the technical differences between Terra Classic (Luna Classic) and Terra 2.0, justify the choices that led to the fork, and guide developers and users in choosing between the two chains.
1. Architecture and Protocols
Terra Classic (Luna Classic):
- Consensus: Based on the Tendermint protocol with a Proof-of-Stake (PoS) architecture.
- Stabilization: The chain still includes the USTC-LUNA stabilization mechanism, although it is no longer actively used to maintain the 1:1 peg with the dollar.
- Infrastructure: The chain utilizes the same code base as the original Terra before the fork, including modules specific to the algorithmic stablecoin and DeFi tools.
Terra 2.0:
- Consensus: Also based on Tendermint with Proof-of-Stake, but with optimizations aimed at improving transaction speed and network security.
- Absence of Stablecoin: Unlike Terra Classic, Terra 2.0 does not support an algorithmic stablecoin like USTC. The focus is on developing decentralized applications (dApps) and financial products without reliance on a stablecoin.
- Updated Modules: Terra 2.0 benefits from updated modules and APIs designed to attract developers to build new DeFi solutions and dApps on a more stable infrastructure.
2. Token Economics
Terra Classic:
- Token: LUNA Classic (LUNC)
- Hyperinflation: Following the collapse of USTC, the minting mechanism led to hyperinflation of LUNA, driving its total supply into the trillions. This situation significantly decreased the value of LUNA Classic, leading to a loss of investor confidence.
- Burning Mechanism: The community has initiated efforts to burn a portion of the circulating LUNA Classic to reduce the total supply and potentially restore the token’s value.
Terra 2.0:
- Token: LUNA
- New Distribution: LUNA on Terra 2.0 was redistributed through an airdrop, following a plan designed to reward previous LUNA Classic holders, developers, and active users.
- Supply Control: Terra 2.0 implemented strict mechanisms to avoid hyperinflation and ensure controlled distribution of new tokens while providing incentives for network participation.
3. Governance and Community Participation
Terra Classic:
- Decentralized Governance: Terra Classic continues to operate with decentralized governance, where LUNA Classic (LUNC) holders can vote on protocol change proposals.
- Focus on Restoration: Recent proposals have focused on initiatives to restore confidence in LUNA Classic, such as burn plans, security improvements, and efforts to revitalize the ecosystem.
Terra 2.0:
- Reset Governance: With the launch of Terra 2.0, a new governance system was established, distinct from Terra Classic. LUNA holders on the new chain have the power to propose and vote on changes, focusing on the growth of the new decentralized economy.
- Innovation-Oriented: Terra 2.0 governance is oriented towards innovation, with a strong emphasis on attracting developers and creating new dApps and financial services.
4. Ecosystem and Development
Terra Classic:
- Legacy Ecosystem: Terra Classic retains the original Terra infrastructure but has seen reduced developer activity following the collapse of LUNA and USTC. The chain continues to support existing projects that have not migrated to Terra 2.0.
- Restoration Projects: Several projects are underway to attempt to restore economic activity on Terra Classic, although interest has largely shifted to Terra 2.0.
Terra 2.0:
- New Start: Terra 2.0 positions itself as a fresh start, with strong community support for developing new applications and financial services.
- Project Incubation: Terra 2.0 benefits from project incubation programs to attract new developers and startups, with grants and technical support to accelerate innovation.
Conclusion
This comparative documentation aims to provide an overview of the two chains post-fork, allowing users, developers, and investors to make informed choices. It justifies the fork by explaining how Terra 2.0 positions itself as a stable and innovative platform for the future, while acknowledging the community’s efforts to maintain and revitalize Terra Classic.
This document serves not only to clarify the differences but also to demonstrate the strategic vision behind the creation of Terra 2.0 and the community’s efforts to maintain the viability of Terra Classic.
