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Terra (LUNA) Columbus 5 Upgrade: Why Does It Matter?

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Terra (LUNA) is ruling the markets lately and seems like everyone wants a piece of it. Demand for UST (TerraUSD) as a stablecoin has been growing and that is why LUNA price hit an all-time high this month ($44.34). There's big news for all the LUNA Holders & users aka Lunatics - Columbus 5 Upgrade that will happen by the end of Sept. 2021. It was supposed to release on 9th September but the release date has been postponed by 3 more weeks. Checkout the basic Terra (LUNA) guide to know more about this protocol and how it works.

In this blog, we are going to discuss the key points to this upgrade and how they will impact Terra's ecosystem. Let's start!

Columbus-5 is the most anticipated mainnet upgrade of the Terra Ecosystem. The changes were approved by governance voting and it is set to become the most important upgrade ever to happen on Terra Blockchain. One of the major goals of Terra is to integrate more blockchains and this upgrade would take it one step further towards this goal. Now let's have look at the major changes that would happen once Columbus-5 goes live:

  1. Seigniorage Burn: Terra's stablecoins achieve price stability by algorithmically adjusting its supply as per demand. The supply of stablecoin (Terra USD or Terra KRW) has to increase when demand is more. In order to mint 1 UST (Terra USD), an equivalent amount of LUNA is burned which is called Seigniorage. Price is stabilized through arbitragers in a decentralized way. A certain percentage of seigniorage was used reward oracles through community's fund. But now it will be burned completely and take those LUNAs out of circulation forever.

  2. Stargate Upgrade: Inter Blockchain Integration: The upgrade to Stargate will introduce Inter Blockchain Communication protocol (IBC) which is also adopted by Osmosis. The IBC provides support for interchain assets such as Solana, Polkadot, and Cosmos, etc. which means anyone can easily swap assets from these chains to Terra and vice versa. This will help in expanding Terra's ecosystem to the wider crypto community. There is one more migration called protobuf migration that could increase transaction speed by 10x-100x TPS. Terra transactions are quite fast already!

  3. Ozone and Wormhole: Ozone is Terraform Lab’s insurance protocol to provide coverage in case of any technical screw-ups! Known to be cheaper and more reliable as compared to other insurance protocols out there. Wormhole is simply a bridge between Terra and Solana.

This upgrade will have a major impact on Terra's ecosystem and serve as a huge milestone in its roadmap. It's going to introduce several key changes that will affect all LUNATICS:

  1. Seigniorage Burn could push LUNA's price even more as more adoption continues.
  2. Stargate and IBC upgrade will increase interoperability among other top blockchains. This will further increase Terra's adoption and provide more liquidity in the system. Also, Terra will be blazingly fast.
  3. Hackers are known to leverage technical loopholes to steal investor's money. Ozone protocol can provide another safeguard and reduce the risk of investors.
  4. Wormhole connects Terra with Solana and opens up a ton of opportunities for both chains. We know how Solana performed in 2021 so it makes sense to collaborate with such a cool community.

I am really excited for Columbus-5 because I am a LUNAtic myself. Do you hold some LUNA? Are you aware of this upgrade and its importance? Comment below!


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