Despite an impressive crash and the disappearance of almost 60 billion dollars, Terra will revive a blockchain and a cryptocurrency project.
Some had buried it — but the Terra ecosystem will rise from its ashes. In any case, this is what Do Kwon, the founder of the cryptocurrency LUNA and the stablecoin UST, and the members of the community hope. They voted overwhelmingly in favor of in proposition 1623which plans to relaunch the Terra blockchain and create a new cryptocurrency.
Less than a month after the impressive crash of Terra, it seems that the ecosystem could therefore start again. Community members were called upon to vote on a governance proposal, submitted by Do Kwon. The result was known in the afternoon of May 25, 2022: 65.5% participants accepted the relaunch of the project. 20.98% of participants abstained, 0.33% voted no, and 13.20% voted no with a veto.
A difficult recovery
The resumption of Terra is scheduled for May 27. The main changes include:
- The creation of a new Terra blockchain, which will not have an algorithmic stablecoin. The old chain will be renamed Terra Classic, and the old tokens, Luna Classic. The new cryptocurrency will be named LUNA.
- LUNAs will be distributed to owners of Luna Classic, UST, and blockchain developers.
- Network security will be enhanced, with a mechanism described as “token inflation”.
Do Kwon’s proposal also provides that the new LUNA tokens will be distributed as follows:
- 30% for the community pool,
- 35% for LUNA owners, calculated on their possession before the fall of the project,
- 10% for UST owners stupid in the Anchor protocol, calculated on their possession before the fall of the project,
- 10% for LUNA owners, calculated on their possession after the project’s collapse,
- 15% for UST owners, calculated on their possession after the project’s collapse.
Despite the approval of the recovery plan, the recovery promises to be difficult for Terra. Investors will surely take some time to trust the blockchain again after its setbacks, and it is not certain that the new cryptos will one day regain the popularity or the value they had before the crash. Nothing says that the former owners of Luna who hope to be reimbursed thanks to the distribution of new tokens will be able to do so.
For Terra, the problems started when one of the two blockchain cryptocurrencies, the stablecoin UST, lost its peg to the dollar. In order to put it back on its feet, Do Kwon and the Terra teams chose to create more LUNA, Terra’s other crypto, which should have brought it back into balance.
But the maneuver was not enough, and even dragged the LUNA down. At the beginning of May, a UST was worth 1 dollar, and a LUNA was trading around 80 dollars. Now, a UST is valued at $0.088, and a LUNA at $0.00018. In all, Bloomberg estime that the Terra crash cost $60 billion in losses.
Source: Numerama by www.numerama.com.
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