Whether or not it is possible to mine a cryptocurrency depends on the characteristics of the network on which it is located. To answer the question posed here, we first need to break the elements down with a few questions of our own.
When it comes to cryptocurrency mining, you need three essential ingredients:
- Mining equipment – this is specific to the algorithm being used by the network.
- Mining pool – usually, mining from within a pool will increase your chance of creating a block within the network.
- Technical knowledge – mining is complex, so possessing some technical skills will come in handy.
Proof of Work
Proof of Work (PoW) is a consensus protocol that requires miners to solve complex mathematical algorithms in order to validate transactions and earn rewards. It is a secure ‘mining’ system that deters people from tampering with the blockchain.
What is Terra?
Terra is an open source blockchain that hosts a mighty ecosystem full of decentralized applications and developer tools. It operates on the Delegated Proof of Stake (DPoS) consensus and groundbreaking technologies. The Terra blockchain is one of the fastest chains available, enabling next-generation financial products to be accessible by anyone with an internet connection.
Founded by Do Kwon and Daniel Shin of Terraform Labs in 2018, a total of $32m was raised to fund the development through the private sale of Luna coins. Investors included centralized sources such as Binance, OKEx and Huobi.
Proof of Stake
Proof of Stake (PoS) is a consensus protocol that allows users to earn rewards by holding onto their coins – for example, Luna coins. To add a block to the blockchain, coin holders must have a designated number of specified crypto coins. This process is known as ‘minting’ or ‘forging’.
What is Luna?
Luna was launched in 2019 and at its height, ranked seventh largest, one of the most successful decentralized coins. The Terra protocol is to create stablecoins pegged to fiat currencies, for example, the US dollar, euro and South Korean won.
Stablecoins are meant to have a fixed value similar to the currency they are pegged to, enabling crypto currency prices to become more predictable. Luna coins exist on a blockchain that is accessible to global users, so only one crypto wallet is required, not multiple international bank accounts.
What is Luna used for?
Luna is the Terra’s native token used for staking and governance. It serves four crucial functions:
- Luna coins are used to pay for transactions within the network.
- To govern Terra, a user must acquire Luna coins. Holders can vote and make proposals.
- As a DPoS network, Luna is an incentive for validators. Luna holders can delegate verification rights to node operators (staking).
- Luna ensures that the value of Terra stablecoins pegged to fiat currency is maintained.
Validators are responsible for securing the Terra blockchain and ensuring its accuracy. Validators propose blocks, vote on their validity and add each new block to the chain in exchange for staking rewards from transaction fees. In turn, Luna holders can stake their coins to validators in exchange for staking rewards.
Staking is the process of delegating Luna to a validator in return for staking rewards. Only the top 130 validators, whose rank is determined by the amount of Luna delegated, can participate in the consensus. Validators with larger delegated stakes are typically chosen to propose new blocks, and earn greater rewards.
The cryptocurrency market continues to grow exponentially and for investors it can prove particularly challenging. September 2021 saw Terra launch an upgrade that proposed new features for the Terra blockchain. Luna’s value is reliant on Terra’s growth, and updates to the blockchain saw the Luna crypto price soar.
Originally launched in July 2019, the Luna coin price began at $1.31; a year later, it was still under $10. However, the Luna value saw a huge increase by the end of 2021 and continued to rise into the spring of 2022, when it held a Luna price of $119.18, which is an all-time high for the cryptocurrency.
Can you mine Terra Luna?
So, back to the original question…
Quite simply, no! It is not possible to mine Terra Luna as it uses the Proof of Stake consensus mechanism as opposed to the Proof of Work mining system. With the former, you only need to apportion your Luna coins to qualify as a network validator, whereas with the latter, you need to solve complex mathematical algorithms.