Definition of Circulating Supply

According to the Binance Academy, circulating supply is defined as the number of cryptocurrency coins or tokens that are publicly available and circulating in the market. The circulating supply can increase when new coins enter the market (either by minting or mining ) or decrease when coins disappear from the market (usually via burning).

In the case of LUNA, the circulating supply should decrease over time. This is because of the way LUNA and UST work. For every UST that is minted, 1 UST of LUNA is burned. This means that when the demand for UST increases -> more UST is minted -> more LUNA is burned. The market cap of UST has increased significantly over the last three months, meaning we should see a general downtrend in the circulating supply of LUNA.

How to calculate the Circulating Supply

The true circulating supply of LUNA is displayed on CoinMarketCap. However, this number is quite tricky to replicate using on-chain data. The following query should provide the accurate circulating supply:

SELECT SUM(balance) FROM terra.daily_balances WHERE currency = 'LUNA' AND address != 'terra1fl48vsnmsdzcv85q5d2q4z5ajdha8yu3nln0mh' AND DATE(date) = CURRENT_DATE() - 1 Where the address refers to the main address of TerraFrom Labs. This address holds about 300M LUNA and is not part of the circulating supply. Therefore, it is excluded. However, the query above results in a current circulating supply of about 900M LUNA, which is not even close to the CoinMarketCap number of about 380M.

Eventually, the following query seems to provide the most accurate circulating supply:

SELECT SUM(balance) FROM terra.daily_balances WHERE currency = 'LUNA' AND address != 'terra1fl48vsnmsdzcv85q5d2q4z5ajdha8yu3nln0mh' AND DATE(date) = CURRENT_DATE() - 1 AND address_label_type IS NULL This query also excludes all addresses that have an address label. For example, these are addresses of an exchange, a defi protocol, a dex, validator addresses etc. It is unclear why excluding these addresses provide a good approximation of the circulating supply. For example, the hot wallet of Binance should also be included because the LUNA on Binance should also count towards the circulating supply. Therefore, the query above does not seem to be the optimal solution for finding the circulating supply but will provide a very good approximation using on-chain data.

Conclusion

Due to the tokenomics of LUNA, the circulating supply of LUNA should decrease over the long term assuming the demand for UST increases. In the last 3 months, we saw some major volatility in the circulating supply of LUNA. From December to mid-January, the circulating supply was in a downtrend (more clear on data of messari.io).

The circulating supply also saw a significant increase at the end of January due to the funding of the Luna Foundation Guard. Due to the tokenomics of LUNA, we can expect the circulating supply of LUNA to decrease in the foreseeable future (especially due to the uncertainty in the market right now which drives up demand for UST).

As can be seen, the graph above line up almost perfectly with the circulating supply graph on messari.io. The spike on January 22th can be explained using this article. On January 22th, the Luna Foundation Guard (LFG) was formed. With is a "non-profit organization established in the Republic of Singapore dedicated to supporting the advancement of open-source technology, facilitating the growth of the Terra ecosystem, and improving the sustainability and stability of Terra’s algorithmic stablecoins."

On January 22th, LFG was funded with 50M LUNA from TerraForm Labs. This meant that 50M LUNA entered the circulating supply, resulting in the significant spike above.