Terra Luna Classic is the latest top-tier cryptocurrency to enable IBC capabilities, and crypto enthusiasts are more than pleased.
Terra is a popular application-specific blockchain built on the Cosmos SDK, an open-source framework for creating Proof-of-Stake (POS) blockchain assets. Terra is the creator of two cryptocurrencies, UST, a stablecoin linked to the US dollar, and LUNA, a more volatile crypto asset.
Terra’s UST and LUNA coins have been among the most popular investment vehicles in recent years. But now, with LUNA’s incorporation of IBC, the crypto community has high hopes for the coin.
The IBC (Inter-Blockchain Communication Protocol) is an open-source protocol that independent blockchains use to communicate with each other. IBC allows various cryptocurrency chains to work together seamlessly. Rather than each chain communicating with the other, they share information into one hub using smart contracts that connects all the chains.
With Terra’s ecosystem valued at over $18 Billion, users are excited about the new IBC capabilities. With Terra Luna Classic’s latest move, they will be one of 18 IBC-enabled chains that’s part of a network that clocks in more than 1.2 million IBC transactions and growing.
There are multiple benefits for Terra and its users. Now that LUNA is connected to the IBC, LUNA chains and users will have increased usability. Further, LUNA will work more efficiently, reducing energy costs and processing times for its users.
However, many believe the change hasn’t come soon enough. In May, LUNA’s price crashed to a 52-week low following a whale investor adding $285 million UST into the system. As a result, Terra’s UST coin lost value compared to the dollar, leading to troubles with LUNA.
Since then, investor confidence in LUNA has dropped significantly. Many believe the algorithm underlying LUNA’s value can’t withstand the surge in trade of UST. This sent UST holders into a selling frenzy which negatively impacted the price of LUNA, sending it to nearly zero.
The summer’s cataclysmic event isn’t the only thing to rock Terra’s value. Founder Do Kwon has been in the spotlight for allegations claiming he misguided investors, further bringing down the price.
Despite Terra’s troubles, there is still hope for a recovery in the near term. The LUNA ecosystem has continued building its blockchain with the most recent decentralized financial (DeFi) platforms. Further, with more than 1 million active members, Terra doesn’t plan on closing shop any time soon.
Terra is still considered a significant player in the cryptocurrency market. With broad support from exchanges like Binance, LUNA and UST still have a substantial potential upside.
The following year will be challenging for all cryptocurrencies. With a looming economic recession, a historical crypto winter, and the fallout from the FTX bankruptcy, it's likely that many volatile assets, from traditional stocks to cryptocurrencies, will take a hit.
However, the mood for long-term cryptocurrency use has barely wavered. Many major banks and investment firms are betting big on crypto, with little sign of slowing down. While the short-term may be turbulent, cryptocurrencies like LUNA and UST have a bright and promising future.