LUNA is the native coin of the Terra 2.0 blockchain, the fork that emerged from what’s now known as Terra Classic – the blockchain powered by a suite of stablecoins that collapsed in a dramatic fashion in May 2021.

LUNA hit its all-time high of $19.54 when it launched May 28, 2022. The coin fell sharply the same day, hitting lows of $3.63, before recovering to about $7 the following week.

The coin has a maximum supply of one billion tokens. Upon its launch, LUNA was airdropped to holders of LUNC (the old versions of LUNA, the utility token for Terra) and USTC (TerraUSD, the failed algorithmic stablecoin built on the network). Those who held a UST, a staking derivative of UST that represented UST held in Anchor, a lending protocol for Terra, also received tokens from the airdrop.

Thirty percent of the LUNA airdrop was issued to those who held UST or LUNA before May 7, 2022 – the date of UST’s collapse – and the rest will be issued to those that held LUNA or UST after Terra’s collapse but before May 27, 2022 over two years, after an initial six-month break.

LUNA is the rebranded version of the “balancer” token that propped up a failed algorithmic stablecoin called UST and was housed on a blockchain protocol called Terra.

The old version of LUNA, now known as Luna Classic (LUNC), helped maintain the price of UST, a stablecoin pegged to the price of the U.S. dollar.

LUNA was designed to maintain UST’s price through arbitrage – the theory was that more LUNA was issued to prop up the price of UST if the latter fell below $1 and LUNA was burned if UST rose above $1. Thus if the price of either was slightly out of kilter, arbitrageurs would prop up the price of the other asset.

But neither LUNA nor UST were backed by anything else – aside from, shortly before its collapse, several billion dollars of bitcoin that an organization called the Luna Foundation Guard (LFG) had bought to defend the coin’s peg.

When UST lost its peg to the U.S. dollar in a sudden crypto crash in May 2022, LUNA’s arbitrage mechanism couldn’t support it, sending both tokens into a death spiral. Not even the LFG’s bitcoin could save the peg, or the community’s decision to destroy 1.3 billion UST coins.

LUNA had fallen from about $84 in early May to $0.00009592 on June 3, and UST fell from $1 to $0.02.

Do Kwon, the South Korean founder of Terra, decided to reboot the Terra network under a new name. He called it Terra 2.0.

Terra 2.0 blockchain is another proof-of-stake chain built on Cosmos – it’s basically Terra Classic, only without the failed UST stablecoin. Terra 2.0 brings several dapps from the old Terra blockchain, including decentralized exchanges Terraswap and Astroport, staking derivative protocol Lido and lending market Mars.

Terra 2.0 was proposed by Kwon, who founded Terra along with Daniel Shin under Terraform Labs.

After UST collapsed in May 2021, the South Korean government launched a Digital Assets Committee to watch over crypto exchanges and pledged to investigate Terra’s collapse. The government also fined Kwon for tax evasion in 2021.

Like Terra Classic, Terra 2.0 operates through decentralized governance.