Terra’s native token LUNA has been climbing in an aggressive ascent towards the US$50 mark, from around just US$10 at the end of July. The new ATH was recorded on October 4 with LUNA peaking at US$49.45 following Terra’s network upgrade.
$1 Billion Worth of LUNA Tokens Burned
The highly anticipated Columbus-5 upgrade went live on September 30, introducing changes to the Terra network that will add a deflationary mechanism to LUNA’s token economics by implementing token burns. LUNA is Terra’s utility token, used for maintaining equal value to the US dollar for Terra’s Stablecoin UST.
Since the upgrade, instead of LUNA tokens being transferred to a community pool, they are now burned whenever UST is minted. About 23.4 million LUNA tokens worth approximately US$1 billion were burned on the day of the upgrade, which resulted in LUNA’s price jump. The new deflationary model is very bullish for LUNA’s future price prediction; the more LUNA tokens that are burned and taken out of circulation, the more the asset increases in value as it becomes more scarce.
The supply burn places deflationary pressure on LUNA making it increasingly scarce … This was a key driver for recent price action.
What is the Upgrade About?
The Columbus-5 upgrade is significant for Terra investors because it increases compatibility between Terra and other blockchain networks by enabling the Inter-Blockchain Communication (IBC) standard. IBC will let users easily transfer LUNA, the TerraUSD (UST) stablecoin, and other assets from Terra to alternate networks and vice versa. It will position Terra to become the de facto stablecoin of the Cosmos ecosystem (a project aiming to build a network of independent blockchains communicating through IBC).
Last week, Crypto News Australia placed LUNA among the top 3 coins to watch.
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