Terra’s bullish case after Columbus-5 upgrade

Terra’s (LUNA) three-month rally saw its token rise by 674%, catapulting LUNA to the ranks of potential so-called “Ethereum killers.” LUNA has been on a tear lately because Terra’s most recent upgrade, Columbus-5, has effectively overhauled its tokenomics and brought significant changes to its technology.

LUNA currently sits in fourth place in total value locked (TVL) among other blockchains, indicating its growing popularity for decentralized finance (DeFi) applications and also underpins its long-term viability.

Terra is a layer-one blockchain developed by South Korean startup firm Terraform Labs and was released in January 2018. It has a payments-focused ecosystem powered by algorithmic stablecoins and aims to be the infrastructure for all the apps being built by Terraform Labs and the Terra community.

Terra already serves real-life utility, particularly among merchants. Arrington Capital, Lightspeed Venture Partners and Pantera Capital have committed about $150 million to fund projects based on Terra.

Terra’s moving parts

Terra is built using Cosmos, which uses the Tendermint delegated proof-of-stake consensus mechanism. This makes it possible to scale up to thousands of transactions per second along with near-instant finality at much cheaper fees compared to Ethereum. Cosmos is seeing use by other major projects such as Binance Chain, Crypto.com and Cosmos Hub.

Currently, Terra has 139 validators, with a total of 341 million staked LUNA, according to Terra Analytics.

An important detail about the Terra blockchain is that it utilizes a dual token system, which involves Terra (LUNA) and TerraUSD (UST). LUNA serves as the protocol’s utility token, while UST is the native stablecoin.

LUNA’s tokenomics ensure the stability of UST and other stablecoins. UST, on the other hand, is an algorithmic stablecoin introduced in September 2020. This means that UST doesn’t require any centralized or collateralized backing, which helps it avoid dependence on central entities and other centralization issues.