Mars launches protocol and it fails woefully. Here’s why

Cryptocurrency is taking off like never before, with new coins launching every day on various networks. This will likely continue as it has since 2009 through the year, and there is no end in view. Apart from the general crypto market, the evolution of DeFi and Decentralized autonomous organizations have put more faith in the fact that it only gets better from here. For instance, What is Chainlink Price prediction might spur you to check other DeFi projects that will soon rally. 

An interesting fact surfaces when discussing DeFI, the growth of the top DeFi networks, using TVL in respect to the number of protocols as the criteria. Data culled from DeFiLlama shows that Ethereum is home to 579 protocols, compared to Solana’s 64, Avalanche’s 187, Binance Smart chain’s 348, and Terra’s 25. The outlier amongst these five protocols is Terra with its LUNA token. Its small number of protocols on it and competitive TVL needs to be studied; maybe not just today. Okay, let’s take a brief look at it. 

Terra (LUNA)

The Total Value Locked is a metric used to know how valuable a crypto liquidity pool is. It measures this by calculating the number of crypto assets that have been staked in the pool. 

For Terra, its TVL was at an all-time high of $20 billion last December, but it dropped $7 billion with the crypto market crash at the start of the year to around $13 billion. Despite the low number of protocols built on it, the TVL seen on Terra is enough for second place, only after Ethereum. The logical explanation given for the TVL’s rise to its latest figure of $26 billion owes to the latest news that Terra labs will hedge exposure for the terra stablecoin with Bitcoin worth around $1billion. Also, the news of a new protocol, the Wonky Mars Protocol, launching very soon is another reason for the rise.  

When a protocol’s tokens rise, it is often believed that there is growing optimism in the protocol, but the truth is, does having a new protocol really influence the value accrued to a network? There is only one way to know. Let’s find out. 

Do new products influence LUNA?

Most times, while a protocol is still in its developmental phase, the demand for stablecoin is always on the rise. The main reason for this is that while protocols will want liquidity, users will want early entry into these protocols for incentives. stablecoins are the major way to get stability on these entries.  

To keep the price of UST pegged at $1, the more UST is minted, LUNA is burnt to reduce the supply. The less the supply, the higher the price goes. Two recent examples of these are shown when two protocols, MARS and Astroport, launched. 

Due to the Mars protocol being announced on Terra in February, before it even launched, LUNA increased from $50 to $60 in less than 48 hours. 

Astroport did the same thing two months earlier. Before launch, it moved the price of LUNA from less than $60 to $90. 

While we have confirmed that the two protocols mentioned above indeed moved the Terra Network, perhaps the pressing question is if they added value to the ecosystem is another question entirely. 

Astro

Looking at figures from Astroport, one can infer that the project not only moved the LUNA token it also brought some form of value to the Terra ecosystem. After the lock drop period, Astroport accumulated around $90 million, a figure that dipped with the crypto market at the start of 2022. 

Things have reversed, and the token is now trading around its initial valuation. 

Apart from the amount accumulated, the number of swaps has been increasing ever since the project launched, and this can only mean one thing; The number of users on the platform is increasing. 

While the story of Astroport speaks about success, that of Mars protocol is almost a stark opposite.

Mars

When march launched just about a month ago, the MARS token price dipped by almost 60% to 0.7UST within an hour after launch. It was discovered that the protocol was inaccessible on the web browser, and the airdrops could not be claimed as at when due. However, there were some users who had advanced knowledge of the Terra blockchain that got their tokens through the terra station before others could. These ones dumped the tokens almost immediately after claiming them, and this caused the price to dip. 

Two products introduced by the Mars protocol also failed to enjoy the pre-launch success they were predicted to have. For Red Bank, Mars’ savings and lending platform, there has not been substantial growth since a few days after its launch, and the highest it got to was 5000 users in a day. The volume on a daily basis also crashed from about $212 million to about $13 million around the end of March 2022.  While some circles believe the issues with Mars Protocol surpass what happened on launch day, there is little to suggest otherwise. Perhaps the lesson to be learned in Astroport and Mars is that the launch of a protocol does not always improve the value of a network. Value is always increased by perception. To invest or trade-in some valuable cryptocurrencies, you can visit Redot.com.