Columbus-5 Launch: Is it the Dam Holding the Flood?
What changes will come from Columbus-5?
The Terra community is expecting major changes from Col-5, but just how significant are those changes? Let’s look at the key upgrades:
(For more explanation, you can take a look at this tweet which I have summarized.)
3 key upgrades from Columbus-5:
- Burn all seigniorage
To understand the importance of burning all seigniorage is, we first must understand Terra’s tokenomics better.
TerraUSD (UST) is the blockchain’s native stablecoin. It is algorithmic which means it needs no centralized/collateralized backing. Instead, it is stabilized through arbitration.
When UST is minted, LUNA is burned. This creates a deflationary cycle for LUNA’s value. The LUNA that is burned is called seigniorage.
Up until now, a portion of the seigniorage has gone to the overfunded community pool and has been used for oracle rewards. After Columbus-5 launches, the seigniorage will be burned that LUNA will be burned forever. It sounds risky, but it shouldn’t be. In fact, LUNA’s value should increase.
This was a decision made based on a governance poll that is believed to make the LUNA → UST swap much more efficient.
2. Upgrade to Stargate
The upgrade to Stargate enables integration capabilities of the Inter Blockchain Communication protocol (IBC). The IBC provides support for interchain assets such as Solana, Polkadot, and Cosmos — some of the biggest names in crypto.
To put it simply, this represents a huge boost to Terra’s use case. Through Cosmos comes more than 250 dApps to integrate with and the Gravity Bridge (the most decentralized bridge to Ethereum yet). This, of course, grows UST demand in a big way.
3. Integration of Ozone and Wormhole
Lastly, with Columbus-5 comes Ozone — Terraform Lab’s own coverage protocol. This will undoubtedly lock up a significant pool of UST and further the safety net that sits below Terra’s protocols.
Although Terra (Anchor) has several options for coverage now, Ozone will be the de-facto insurance for projects built by Terraform Labs. I anticipate it will be cheaper and more reliable than other policies.
For a long time, insurance — or a safety net — in crypto has been the missing piece to mainstream adoption. Ozone and Anchor’s high-yielding savings account are a step in the right direction.
And Wormhole — the bridge between Terra and Solana — will be enabled. This will significantly reduce friction for UST moving to Solana. This will allow for further integration and collaboration between Terra and Solana’s great stableswap projects.
Many people have noticed the relationship between the Terra and Solana ecosystems blossoming as of late. It could be that Wormhole is getting closer to reality than developers anticipated.
To estimate the immediate effect this will have on the ecosystem is impossible. As the title suggests, it is likely we will see a flood of new project launches which will all happen at once. Some think these protocols are already through the development stage, through checks on the testnet, and are not just waiting for the mainnet to launch. This could be an avalanche of use cases hitting the market as we have never seen.