The Terra stablecoin, UST, will be moving over to the Cosmos universe imminently, which should be quite helpful for the progress of DeFi in that ecosystem.
Do Kwon, CEO of Terraform Labs, the company behind the Terra blockchain, told The Defiant via email that once the current vote to enable inter blockchain communication (IBC) is through at just before midnight Eastern Time, the new functionality will kick in right away. This will mean that UST and Terra’s sought-after governance token, LUNA, should shortly be available to anyone with funds in ATOM or other IBC-ready assets.
Stablecoins are maybe the most important basic building block for decentralized finance (DeFi), and UST in particular has grown over $2B in total supply this year as it is used in Terra’s growing DeFi ecosystem. The move onto Cosmos should open up further use cases for UST, as well as provide a stablecoin for Cosmos-based applications.
“UST is likely to be the reference price for all of Cosmos in the next month,” Zaki Manian, co-founder of Iqlusion, a blockchain validator company and a longtime Cosmos developer, told The Defiant via text message. “Until now all the farming opportunities in Cosmos required holding volatile assets. The entire situation for bootstrapping DeFi in Cosmos changes today.”
IBC, which went live in late March, is a way of managing messages between independent blockchains. It was built for the Tendermint blockchain universe but potentially capable of communicating with any blockchain. Tendermint is part of the Cosmos ecosystem and on some level IBC speaks to the fundamental idea of the Cosmos project, a network meant to enable smooth communication between sovereign blockchains.
According to a site that tracks the market capitalization of blockchains in the Cosmos ecosystem, Cosmos-Cap, Terra is now the second-most valuable blockchain in the space, at $17B, for its LUNA token. Terra also operates several algorithmic stablecoins, though it is best known for the one that tracks the U.S. dollar, UST, which has a market cap of $2.7B.
This should be a key moment for Cosmos as one of the best-known projects using its underlying technology starts participating in the network.
“We often speak in terms of ecosystems and chains like they are monolithic entities, but the reality is that each of these ‘units’ are actually composites of a diverse set of communities which continue to evolve in unpredictable and open-ended ways,” Charleen Fei, IBC product lead at the Interchain Foundation, told The Defiant via email, comparing interoperability among blockchains to supply chains that cross political and cultural borders in the analog world.
There’s almost no way that Terra’s proposal won’t pass at this point. First announced on Oct. 6, the vote, Proposal 128 went live shortly thereafter. It ends on October 20, a little before midnight Eastern Time. With 269M LUNA governance tokens voted in favor of enabling IBC, out of 345M possible, it is now a given that the measure will succeed.
A negligible number of votes have been cast against the measure.
“Web3 will be a network of connected blockchains, and $UST will pave its highways,” Terra’s CEO Do Kwon tweeted this week.
While the underlying technology for the Terra blockchain comes from Cosmos, it’s not the only blockchain that is interoperating with Terra.
Wormhole v2 interface went live, which enables Terra to reach Solana, Binance Chain and Ethereum.
It announced a partnership with the proof-of-work blockchain, Kadena, late last year.
The Terra blockchain also has its own unique DeFi offerings, most notably Mirror, which makes synthetic assets that track the price of equities in the U.S. stock market, and Anchor, a lending and savings platform.
For American investors, this could be the first time many have had simple access to Terra’s offerings. Cosmos’s ATOM is listed on Coinbase, so it can be easily purchased there and then transferred to the Cosmos blockchain. From there, investors should be able to simply swap into Terra’s assets and move to its chain in order to take advantage of investment opportunities there.