Although terrausd (UST) stable currency and sister token Luna, which lost anchor with the US dollar, experienced a rather dark week, terraform labs has not completely given up. Even though BTC and eth, which account for an important share in the cryptocurrency market, fell by 25% and 30% respectively, kwon do, founder of terralabs, tried to build a new blockchain and distribute hundreds of millions of new Luna tokens to investors hit hard by the stampede**
May has been a tough month for all cryptocurrencies. In addition to BTC (- 25%) and eth (- 30%) leading the coin circle, Luna tokens fell from a high of $81 last month to almost worthless.
However, as the developer behind Terra blockchain and ust / Luna token, terralabs is brewing a new plan that hopes to turn things around.
The stampede of cryptocurrency is due to the loss of anchor of the stable currency of terrausd (UST) algorithm linked to the US dollar.
Unlike tether, usdc and other stable currencies, ust does not rely on US dollar cash reserves, but relies on the native Luna token on terra blockchain to maintain stability.
The official assumption is that a ust can always be exchanged for a Luna worth $1, even if the value of the UST currency falls below $1 (such as 99 cents).
At this time, the trading arbitrager can maintain the price of the stable currency of the algorithm by purchasing a large amount of ust and converting it into Luna.
To many people's surprise, after accumulating considerable unexpected factors, the mechanism finally collapsed on May 8, during which $2 billion worth of ust was withdrawn and sold.
This led to the decoupling of ust to 98 cents, but its sister token Luna's algorithmic stability mechanism couldn't keep up for a while - as a result, the chain reaction made investors lose confidence in this mechanism, and finally both ust and Luna collapsed.
At present, the transaction price of ust is $13, only one tenth higher than the expected value. Luna's offer of about 50 cents means that more than $15 billion of encrypted assets were burned in the process of collapse.
On Monday, do Kwon, CEO of terralabs, put forward a set of solutions, hoping to build a new chain based on the previous blockchain, supplemented by modifications on some key nodes through the path of "forking" Terra blockchain.
For example, the new Terra blockchain will come into being together with 1 billion Luna tokens to give priority to current Luna and ust token holders and provide financial support for the development of new Terra applications.
However, this idea still needs to be approved by the vote of all Luna holders. If the vote is agreed on Wednesday, the bifurcation will occur on May 27.
Foreign media pointed out that the introduction of 1 billion Luna tokens into the forked and restarted Terra blockchain aims to reset the black history of fighting hyperinflation to an ideal state.
At present, there are more than 6.5 billion + Luna tokens in circulation on the chain, much higher than the 343 million in the week before the crash. In addition, it may be that Luna and don realized that the main selling point of this proposal was removed from the previous ecosystem.
It is reported that Terra application ecosystem has attracted hundreds of developers, who are committed to everything from decentralized Finance (defi) / tokens to advanced infrastructure / community experience. In order to retain these contributors, do Kwon would rather sacrifice terrausd.
Of course, such an operation is not without precedent. For example, in 2016, Ethereum developers were forced to roll back and fork the blockchain because a hacker stole 6.3 million eth (now $7 + billion) worth $50 million from the Dao.
Although this has caused cracks in the community, many people are still immersed in the original blockchain (known as "Ethereum classic"). Finally, if do Kwon's bifurcation proposal is voted through, Terra's old chain will also be renamed "Terra classic".