Terra 2.0 came to be after the original protocol with the same name suffered a death spiral and a collapse. Previously, the Terra protocol was mainly used as a platform for issuing algorithmic stablecoins, the value of which was maintained by the seigniorage(mint and burn) with the LUNA tokens. After the model crumbled in May 2022, Terraform Labs proposed to rework the concept and fork the blockchain. A part of the community backed the original design and remained on the old chain, taking up a new name, Luna Classic.
In Terra 2.0, the main utility no longer relies on algorithmic stablecoins. Developers build decentralized applications (dApps) powered by the Tendermint protocol and the LUNA token. The fork was also a part of the reimbursement plan, and the "pre-attack" LUNA and UST holders are entitled to an airdrop with a vesting period on this chain.