#### What is Terra? Terra (LUNA) is a public [blockchain](https://www.coinbase.com/learn/crypto-basics/what-is-a-blockchain) [protocol](https://www.coinbase.com/learn/crypto-basics/what-is-a-protocol) that aims to combine the price stability and wide adoption of fiat currencies with the censorship-resistance of [Bitcoin](https://www.coinbase.com/learn/crypto-basics/what-is-bitcoin). It was developed as a response to the crash of its predecessor, Terra Classic, and its associated [stablecoin](https://www.coinbase.com/learn/crypto-basics/what-is-a-stablecoin), TerraClassicUSD (UST). The new Terra blockchain continues the legacy of Terra Classic, but without the UST stablecoin. Instead, it focuses on building a robust ecosystem with the help of its community, known as "LUNAtics". The LUNA token is used within this ecosystem, and many [decentralized applications](https://help.coinbase.com/en/wallet/other-topics/what-is-a-dapp) ([DApps](https://www.coinbase.com/learn/wallet/guide-to-dapps)) have agreed to migrate to Terra to continue their functionality. #### How does Terra work? Terra operates using a proof-of-[stake](https://www.coinbase.com/learn/crypto-basics/what-is-staking) consensus algorithm based on Tendermint, where LUNA token holders stake their [tokens](https://www.coinbase.com/learn/crypto-basics/what-is-a-token) as collateral to validate transactions. The network incentivizes security by providing [staking](https://help.coinbase.com/en/coinbase/trading-and-funding/staking-rewards/eth-2-0-staking) rewards of 7% annual [inflation](https://www.coinbase.com/learn/crypto-basics/what-is-inflation). This aligns the interest of [validators](https://help.coinbase.com/en/coinbase/getting-started/crypto-education/glossary/validator-) with the long-term success of the Terra ecosystem. Terra aims to preserve its ecosystem with hundreds of developers working on different decentralized applications. The LUNA token is [distributed](https://help.coinbase.com/en/coinbase/getting-started/crypto-education/glossary/distributed) across Luna Classic stakers, holders, residual UST holders, and essential Terra Classic app developers, making Terra a fully community-owned chain. #### What are the potential use cases for Terra? Terra aims to provide a platform for the development and use of decentralized applications (DApps). It seeks to evolve the world-class user experience and user interface that brought Terra Classic to second place in total value locked (TVL) at its peak. The Terra blockchain is designed to host a vibrant ecosystem of DApps, offering a suite of cutting-edge developer tools. This makes it a suitable platform for developers looking to build next-generation [Web3](https://help.coinbase.com/en/coinbase/getting-started/crypto-education/glossary/web3) products and services. Furthermore, the LUNA token can be used within this ecosystem for various purposes, including paying transaction fees and participating in governance votes. #### What is the history of Terra? Terra was founded in January 2018 by Daniel Shin and Do Kwon, with the aim of driving the rapid adoption of blockchain technology and [cryptocurrency](https://www.coinbase.com/learn/crypto-basics/what-is-cryptocurrency) through a focus on price stability and usability. The development of Terra Classic launched in January 2018 and the blockchain launched in April 2019. However, a bank run in May 2022 led to the crash of Terra Classic and its associated stablecoin, TerraClassicUSD (UST). This event led to the launch of a new chain, resulting in the current Terra blockchain. Despite criticism from various quarters, the revival plan proposed by Do Kwon was voted into effect by the community, leading to the hard [fork](https://www.coinbase.com/learn/crypto-basics/what-is-a-fork) of Terra Classic and the birth of the new Terra blockchain on May 27, 2022.