Update: Proposal to “revive” Terra ecosystem from Do Kwon

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2022-05-15 20:16:24

After nearly 2 days of silence and a long talk with advisors, including CZ – CEO of Binance exchange, Do Kwon’s account on Terra Research forum spoke out about a new proposal to “revive” the Terra ecosystem.

*This article was updated on May 14, 2022.

Regarding the causes – consequences of the LUNA – UST incident, readers can see CHK’s series of reports here:

Terra’s proposal to “reincarnate” LUNA makes no mention of UST

First, this very account admitted that the current situation of LUNA and UST was now “irreparable”.

“Even when the exchange rate is restored, LUNA investors have been liquidated and diluted in value so severely that there is nothing left to rebuild the ecosystem from the ashes. While a decentralized economy needs a decentralized currency, UST has lost the trust of its users.”

In such a situation, the Terra community has voiced its reputation for a hard fork solution to “break and rebuild” all, this proposal by Do Kwon was created to further clarify that direction.

Here is a summary of the preliminary outlines of Do Kwon’s proposal:

The total token supply will be reset at 1 billion LUNA, split as follows:

– 400 million (40%) for Luna holders before the first de-peg event on May 8, excluding Terraform Labs.

– 400 million (40%) to UST holders pro rata at the time of the new network upgrade. Holders of UST must be compensated as much as possible.

– 100 million (10%) to Luna holders at the last moment when the blockchain goes offline – those who buy LUNA at the last minute marginal price should be rewarded for their role in trying to provide network stability.

– 100 million (10%) to Community Pool to fund future development.

All LUNA other than 10% for token holders at the start of the chain must be staked at the time of launching the new network

Recommend 7% inflation rate to protect the network.

In essence, this “hard fork” proposal is a push back in time, aiming to bring everything back to May 8, before the first de-peg. This action is similar to Ethereum’s hard fork in July 2016 to reverse the transaction of the hacker who attacked The DAO Hack.

In addition, this proposal does not mention the future plan for stablecoin UST, which means that Do Kwon has accepted that the option of “sacrificing LUNA to save UST” has been applied for the past 2 days, causing the circulating supply of LUNA to increase from 400 million to 6.9 trillion, which is “useless”. In his statement on May 11, Mr. Do Kwon mentioned turning UST into a “fully-secured” stablecoin, instead of using an algorithmic stablecoin model.

The price of LUNA on Binance once fell to 0.00000112 USD – divided more than 106 million times from the peak of ATH; and UST is about $0.0372 – 96.3% below the $1 threshold it must maintain.

However, it should be noted that this is just a suggestion in Terra’s community forum, has not been confirmed by any official channel, nor is it timed to be approved. At the same time, there is no guarantee that this model will work effectively, when investors’ confidence in this ecosystem has gone up in smoke.

After the proposal was announced, the prices of LUNA/BUSD and UST/BUSD on the Binance exchange increased slightly.

1-minute chart of the LUNA/BUSD pair on Binance at 01:05 AM on May 14, 2022
1-minute chart of the UST/BUSD pair on Binance at 01:05 AM on May 14, 2022

CEO Do Kwon sends condolences on Twitter

Terraform Labs CEO Do Kwon spoke out on Twitter, saying that the “quiet” time of the past 72 hours was to call the community, the project, and those affected by the UST depreciating in value during this time. via. He wrote:

“My heart is breaking from the pain my invention has brought to all of you.”

Even so, the CEO still believes that a decentralized economic model requires a decentralized stablecoin, but it is clear that in the current situation, UST will not be that stablecoin.

Mr. Do Kwon also denied rumors that he or his affiliated organizations made a profit during this time, he personally did not sell LUNA or UST during the crisis.

In the immediate future, the project is synthesizing the process of using Bitcoin funds of Luna Foundation Guard during the time UST was de-peg. As reported by CHK, the Luna Foundation Guard is said to have used all of its $2 billion Bitcoin reserves to “rescue” the UST on May 9, but failed completely.

Mr. Do Kwon also mentioned the proposal to “break and rebuild” the Terra blockchain and the LUNA coin that he had posted to the community. The CEO said that the top goal of the project at the moment is to retain the community of users and developers, thereby agreeing on the next direction and reconstruction.

However, when Mr. Do Kwon returned to Twitter, Algod Trading account, one of the two participants in a $ 22 million bet on LUNA price with Terraform Labs CEO in March, asked Mr. Do Kwon to accept. lose and pay because it is now possible to see that LUNA will never return to the $88 mark, not to mention the project is proposing to build a new blockchain.

Comments from Binance CEO

On the evening of May 14, Binance CEO Changpeng Zhao gave his personal opinion on Terra’s “revival” plan as follows:

“Personal opinion. Not investment advice.

This plan will fail:

The hard fork will not add any value to the new chain. It’s all just vain hope.

– Transactions that have occurred after the blockchain snapshot, including on-chain and off-chain transactions (on exchanges).

Where is the amount of BTC that should be used as a reserve fund?

Shouldn’t ALL of them be used to acquire UST?”

“Do they really think that if they hard fork BTC on the snapshot on November 18, 2021, the newly created chain will have a BTC price of $68,000 (that day’s price)?”

The richest billionaire in the crypto industry also stated that he himself does not hold UST and did not understand the situation at first, but is now caught up in this scandal.

Mr. Changpeng Zhao earlier on the evening of May 13 declared “break the rule” to be neutral, criticizing the Terra team for how to handle the crisis, not listening to Binance’s proposal, but causing the total supply of LUNA to increase nearly seemingly endless, causing the coin’s price to drop to near zero.

Synthetic CHK

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