Technology

Do Kwon Proposes Terra Revival, Including Token Redistribution Plan

Terraform Labs co-founder Do Kwon has put forward a proposal to preserve the Terra ecosystem following the historic decoupling of its algorithmic stablecoin, UST, and the ensuing death spiral that plunged Terra tokens (LUNA) to near zero.

In a Friday post on the Terra research forum, Kwon said, “The Terra community must reconstitute the chain to preserve the developer community and ecosystem.” His proposal, which was in response to groups of validators discussing the possibility of forking the Terra chain, involves compensating UST and LUNA holders who were unable or unwilling to sell their holdings during this week’s price crash.

Kwon proposed that validators restore ownership of the network to 1 billion tokens distributed between LUNA and UST holders, as well as a community fund to finance future development. Specifically, 40% of the newly distributed tokens would go to LUNA holders before the unbinding event; 40% would go to UST holders at the time of the new network update; 10% would be allocated to LUNA holders just before the chain ceased operations and the remaining 10% would go to the development pool.

As for the possibility of the UST converting to a US dollar, Kwon said it probably wouldn’t make any difference, given the massive liquidity developments in the Terra ecosystem this week. In other words, trust in the stablecoin model has been permanently eroded. He explained:

“Even if the peg is finally reset after the last fringe buyers and sellers have capitulated, Luna holders have been so badly liquidated and diluted that we will lack the ecosystem to build back from the ashes.”

At its peak in early April, LUNA’s market cap was over $41 billion, according to CoinMarketCap. The value of Terra’s UST, which can no longer be considered a stablecoin, peaked at nearly $19 billion. After losing its peg to the dollar, UST tumbled to a low of around $0.13 on Friday.

Although there is no way to fully restore the value of the blockchain, Kwon said the redistribution plan has to compensate the network’s debt holders and “loyal community members and builders.”

From a top 10 cryptocurrency project to trading for less than a fraction of a penny, the LUNA price chart provides a striking reminder of just how quickly cryptocurrency markets can change. Source: CoinMarketCap

Kwon’s proposal came about two days after he published a plan to save UST’s dollar peg, which involved increasing the special drawing rights fund and expanding the minting capacity of the protocol. The plan failed to win favor with the so-called “LUNAtics” community, as the price of LUNA and its sister token continued to plummet.

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