- – 10/10/2022
The Terra ecosystem became one of the highest valued crypto ecosystems by market cap during the recent bull run between 2021 and early 2022. Terra’s native token, LUNA, and stablecoin, UST, reached a combined market cap of more than $60 billion in April 2022 just one month before the ecosystem’s historical collapse.
Although Terra’s pegging mechanism failed to keep UST at $1, Terra had some of the most user-friendly decentralized applications (dApps) in crypto as well as a strong community. Crypto communities consist of founders, developers, and investors, among others. Given the talent that the Terra ecosystem attracted, we wanted to explore what these developers are working on now. This paper explores Terra’s development activity and follows the top contributors in the ecosystem. Terminology specific to development activity and crypto can be found in the appendix.
Prior to this analysis, the Sherlock team had hypothesized a migration of Terra ecosystem developers to other blockchains or dApps in our collection of GitHub data covering 122 assets and over 210 GitHub organizations. However, we observed almost no migration to date according to data available in public repositories. Instead, we see a marked decline in development activity for the ecosystem and a lack of new contributions to Terra.
Terra LUNA’s (now LUNA Classic) exponential price growth (Figure 1) was driven by its mint-burn mechanism, which utilized an arbitrage-like approach to maintaining price parity to the USD. Terra UST’s peg was maintained by minting (creating) or burning (destroying) LUNA. For example, if demand for UST increased, then its price may deviate from the $1 peg to, let’s say, $1.01. The supply of UST must increase to accommodate the demand and return its price to $1. To do this, $1 of LUNA is burned to mint $1 of UST.[i] Thus, the supply of UST and LUNA had an inverse relationship based on UST’s demand.
Institutions, centralized exchanges, and leading Layer 1 blockchains welcomed UST and LUNA. Despite the risks, which were known and shared by some but often shouted down by the community, it seemed that demand and adoption had reached critical mass. Until it didn’t. UST’s price started to depeg from $1 on May 8 after a series of large sell orders of UST on Curve Finance and Anchor Protocol, dropping its price to $0.985. Stablecoins can depeg during periods of high volatility and usually recover. However, the following day UST dropped to as low as 35 cents, triggering liquidations, a bank run on Anchor Protocol, and a sell-off of all Terra-related tokens. By May 12, token prices of UST and LUNA dropped to just 12 cents and less than a penny, respectively.[ii] A crash of this speed and magnitude was unprecedented, and many investors experienced heavy losses.
Just a few weeks after Terra’s collapse, the community relaunched the chain and a new LUNA token, this time without the mint-burn mechanism. The old Terra became Terra Classic – renaming LUNA and UST to LUNA Classic (LUNC) and UST Classic (USTC). Now, the new version (Terra 2.0) is another smart contract protocol but without the mint-burn mechanism. The new LUNA token was initially airdropped to holders of original LUNA, with much of the supply automatically staked for varying lockup periods (several months to a year). New LUNA’s price (not shown in Figure 1) reached its peak of $18.87 on May 28 but has since declined nearly 90% and trading below $3 as of September 18.
It should also be noted that South Korean authorities issued an arrest warrant on September 13 for Terra founder Do Kwon and five others.[iii] Among the charges are violating the Capital Markets Act. This warrant comes after months of investigations into financial malpractice and tax fraud.[iv]
Development data – derived from public GitHub repositories – can provide insights into a project’s commitment to innovation and appeal to developers. This section analyzes development activity for the following crypto assets in the Terra ecosystem:
- LUNA (Terra LUNA and UST)1
- ANC (Anchor Protocol)
- MIR (Mirror Protocol)
- ASTRO (Astroport)
- KUJI (Kujira)
This analysis was conducted on data from public repositories. It is probable that developers are contributing to Terra's ecosystem on private repositories or those not covered by Sherlock. The methodology behind the calculations and the associated GitHub organizations (orgs) in this report can be found in the appendix.
Figure 2 shows the commits within the Terra ecosystem by token. Development activity for LUNA rose steadily, on average, from 2020 through spring of 2022. A spike in development activity in late May 2022 coincided with the relaunch of Terra 2.0 on May 28. In September of 2022, commits were at their lowest since February 2020.
Figure 3 displays the active developers who worked on the respective asset’s GitHub organization. The values are displayed as the count of unique developers in a 30-day rolling window. Each dApp had far fewer active developers working on their protocols than LUNA, with the 30-day unique count never exceeding 20.2 It’s common for dApps to have lower development activity than an L1 because the codebase is simpler. For example, the Terra blockchain’s GitHub org supports the blockchain and smart contract infrastructure that dApps run on. By contrast, GitHub orgs for dApps typically contain just the smart contract logic and front-end design of the protocol itself.
The charts and discussion above include all developers in the Terra ecosystem. The below analysis explores where the top developers in the ecosystem – as determined by commits – have contributed code since Terra 1.0 collapse. Specifically, we selected the top 20 developers from the GitHub org for LUNA, and the top 10 developers from the four Terra dApps. Because of overlap between orgs, we comprised a list of 53 active developers based on their code contributions.
Table 1 displays the number of commits to GitHub organizations from our list of top developers. As a relative comparison, the table includes these developers’ code contributions 90-days prior to Terra’s crash and 90-days following. LUNA (terra-money GitHub org) had more commits after May 9, primarily because of its relaunch. The other metric, “line changes per commit”, can indicate the significance of the commit, with a higher value being more substantial changes.
Table 1. Top Developer Activity Comparison
|90-days prior||90-days following|
|Asset||Commits||Line changes/ commit||Commits||Line changes/ commit|
As for Terra dApps, the development activity is significantly lower. Relevant findings from Table 1 include:
- ANC is being maintained by just two developers since June and MIR’s last commit was on May 29. Both have had far fewer commits and line changes per commit following May 9
- ASTRO is the outlier with consistent activity by multiple developers (although lower than before Terra’s crash) and higher line changes per commit.
- Secret Network (SCRT) and Cosmos Hub (ATOM) are independent Layer 1 chains but are present in the table because two developers in our list contributed to their GitHub repos. It should be noted that, like SCRT and ATOM, both versions of Terra were built with the Cosmos SDK, a modular blockchain development framework. Thus, developers will find the technology stack similar to Terra’s.
- Notably, Kujira (KUJI) – a team that offered at least one dApp on Terra with plans to launch more – has since relaunched as its own Layer 1 blockchain.3 It’s likely that Kujira’s repositories were closed source until recently, which may be the reason its activity is so low prior to May 9.
While the analysis thus far has focused on existing developers, we also note that no new developers contributed to any of the GitHub orgs in the Terra ecosystem. That is, the only code contributions to Terra 2.0 or its dApps came from those who contributed to Terra 1.0 or its dApps. This is significant because a project’s ability to attract new developers is an indication of its growth potential.
Finally, because developers can contribute to repositories outside of Sherlock’s covered projects, we also manually investigated the GitHub activity of a subset of our top developer list (the top 20 out of 53). Some noteworthy findings include:
- No developer made significant contributions to any public crypto-related repository that was not in the Terra ecosystem.
- Half of the developers in our subset continued to contribute to the terra-money GitHub org.
- 11 of the 20 contributed to private repositories (data in private repos are not available).
Terra 2.0 Outlook
Terra 1.0 was deeply integrated into other blockchain protocols and dApps, including two well-known cross-chain services, Wormhole and Lido Finance. Wormhole is a cross-chain bridge that supports transfers across blockchains including Ethereum, Solana, Binance Smart Chain, Avalanche, and Polygon. Wormhole supported Terra 1.0 and announced that it will also support Terra 2.0.[v] Lido Finance, a liquid staking protocol, on the other hand stated that it will not support the new Terra chain. This decision was reached through a governance process whereby 95% of the turnout voted against supporting Terra 2.0.[vi]
The mint-burn mechanism of Terra 1.0 separated itself from its competitors. So long as UST was in demand, it almost guaranteed that LUNA’s price would increase. Without this, Terra 2.0 is yet another Layer 1 blockchain in a crowded space – but with a tarnished reputation. Apart from a spike in code contributions toward its relaunch in May 2022, Terra 2.0’s development activity is trending down and currently at its lowest level in over two years. Moreover, no new developers have contributed to Terra 2.0 or its dApps.
It is unclear whether Terra 2.0 can restore its reputation or regain a sizeable portion of its prior crypto market share. Declining development activity, upcoming legal battles for its founders, and macro conditions generally unfavorable to risk assets do not instill confidence in Terra 2.0. However, sentiment can change rapidly, and the Sherlock team will continue to monitor its development activity and standing in the crypto space.
Development activity refers to open-source (publicly available) data from GitHub, a web application that helps manage the version control software Git. Software developers use GitHub to save, collaborate, and share code that runs applications. All the development data from Sherlock is collected from public repositories. Since crypto is inherently decentralized and open source, most projects host their work on GitHub. Projects are organized by organizations and repositories.
Glossary of GitHub terms
Organization (org): “Organizations are shared accounts where businesses and open-source projects can collaborate across many projects at once, with sophisticated security and administrative features.”[vii] Orgs do not contain any files and serve as a management layer to repositories. Orgs included in this analysis were terra-money, Anchor-Protocol, astroport-fi, mirror-protocol, and Team-Kujira.
Repositories (repos): “A repository contains all of your project's files and each file's revision history. You can discuss and manage your project's work within the repository.” Multiple repos are often associated with one organization.
Commits: a Git term meaning that a file has been modified, added, or deleted. File changes are “committed” to a branch on the repository.
Branch: a repo has a base branch (often called “main” or “master”) that serves as the primary codebase. Repos can also have multiple other branches to enable developers to work on different features in parallel. These branches can be merged into the base branch such that any new features are present in the primary codebase.
Pull request: “Pull requests let you tell others about changes you've pushed to a branch in a repository on GitHub. Once a pull request is opened, you can discuss and review the potential changes with collaborators and add follow-up commits before your changes are merged into the base branch.”[viii]
Glossary of Crypto terms
Decentralized applications (dApps): blockchain-based applications that enable users to interact with smart contracts deployed on the blockchain.[ix]
Airdrop: a distribution of tokens to various wallet addresses to bootstrap liquidity. Project teams determine how airdrops are allocated.
Smart contracts: a program, consisting of a collection of functions, that is deployed on a blockchain.[x] A smart contract blockchain is one that supports deployment of smart contracts. Ethereum was the first smart contract platform, enabling it to run flexible applications. By comparison, Bitcoin is not a smart contract platform.
Layer 1 (L1) blockchains: most blockchains are L1s (i.e. Bitcoin, Ethereum, Terra, etc.), which means that their transactions are validated and settled on the main blockchain. Layer 2 (L2) blockchains operate on top of a L1, essentially borrowing the security of the L1 but offering more scalable throughput. L2s are not relevant for this paper.
Open source software is meant to be shared, audited, and iterated on. Copying (or “forking”) repositories is common practice. For example, if project A’s repository is forked by project B, then project B inherits the commits of Project A. From a data and insights perspective, it’s important to separate the development activity in instances of forked repos. All the development activity data that Sherlock provides excludes forked commits to avoid double counting.
Additionally, Figures 2 and 3 only consider code contributions to a repository’s base branch. Data in Table 1 include activity in all branches. We also exclude merged commits, which can arise when a pull request is created and merged into the base branch. This is another way we avoid double counting.
1 Terra maintained the same GitHub org (terra-money) after its crash. The data displayed in the charts analysis the development data but does not differentiate between LUNC and LUNA – we use the same token ticker LUNA for simplicity.
2 KUJI (Kujira) is the exception, as Figure 3 shows, but this activity is because Kujira launched its own blockchain
3 One of Kujira’s dApps, Orca, enabled users to participate in Anchor Protocol liquidations – an important function for borrowing and lending protocols typically dominated by bots and “whales” (large asset holders) with financial and technical resources.
[i] Terra. “How Does Terra Work?”. October 21, 2020. https://www.youtube.com/watch?v=KqpGMoYZMhY
[ii] Krisztian Sandor, Ekin Genç. “The Fall of Terra: A Timeline of the Meteoric Rise and Crash of UST and LUNA.” June 2022. https://www.coindesk.com/learn/the-fall-of-terra-a-timeline-of-the-meteoric-rise-and-crash-of-ust-and-luna/
[iii] Hooyeon Kim. ”Terra Co-Founder Do Kwon Faces Arrest Warrant in South Korea.“ September 14, 2022. https://www.bloomberg.com/news/articles/2022-09-14/south-korea-seeks-the-arrest-of-terraform-labs-founder-do-kwon?leadSource=uverify%20wall
[iv] Chris Williams. “Terra’s Do Kwon Hires Legal Team in South Korea: Report.” August 17, 2022. https://cryptobriefing.com/terras-do-kwon-hires-legal-team-south-korea-report/
[v] “Wormhole supports Terra 2.0”. June 27, 2022. https://wormholecrypto.medium.com/wormhole-supports-terra-2-0-7e75881023c8
[vi] “Should Lido support Terra reboot?”. https://snapshot.org/#/lido-snapshot.eth/proposal/0x865212c61a0b050cc250bfa4f933722b06c2927f7a45e3a39ce4b4416798a491
[vii] GitHub. ”About Organizations”. https://docs.github.com/en/organizations/collaborating-with-groups-in-organizations/about-organizations
[viii] GitHub. “About Pull Requests”. https://docs.github.com/en/pull-requests/collaborating-with-pull-requests/proposing-changes-to-your-work-with-pull-requests/about-pull-requests
[ix] CSIRO. ”Decentralized Applications (DApps)”. https://research.csiro.au/blockchainpatterns/general-patterns/deployment-patterns/dapp/
[x] Etherum.org. “Introduction to Smart Contracts”. https://ethereum.org/en/developers/docs/smart-contracts/