Over the week, Luna Foundation Guard (LFG) used a hefty amount of the reserve in an attempt to save LUNA from the death spiral.
It is estimated that LFG used about US$3 billion of its reserve in an attempt to save the $UST dollar peg. LFG’s reserve went from a healthy US$3.1 billion to only left US$87 million in the bank.
Also Read: What Happened To $LUNA? How It Crashed More Than 95% From Its All-Time High
Do Kwon’s revival plan
Do Kwon’s plan was to fork the current Terra chain and branch it off to a new fully community-owned chain.
The original chain will be renamed Terra Classic and the native token will be Luna Classic ($LUNC). The new fork chain would be once again called Terra and the native token will be Luna ($LUNA).
The new fork will start afresh and it would work without the algorithmic stablecoin (No more $UST). The new LUNA token will be airdropped to the four different stakeholders: Luna Classic stakers, Luna Classic holders, residual UST holders, and essential app developers of Terra Classic.
To ensure that it is fully community-owned, Terraform Labs would seat out on the new LUNA airdrop. If the proposal is approved, the new Terra fork is set to launch as early as 27 May 2022.
Will this really save Terra?
Many are sceptical about Do Kwon’s Terra revival plan. Zhao Changpeng (CZ), CEO of Binance, took to Twitter to voice out the issue of forking.
CZ brought out that forking the Terra chain does not give it any value. The new LUNA will be airdropped to the users but there are no fresh funds injected into the ecosystem.
Instead, he recommends that Do Kwon should use the current Terra reserves to buy back UST. This would however spell the end of Terra.
On the other hand, Do Kwon’s revival proposal received much support from the Terra community. Many developers and builders from big protocols pledge to continue and support the new Terra fork.
Proposal to save the masses
Another proposal by community member “Fatman” is trending and circulating on Crypto Twitter. The proposal calls for a tiered repayment system which favours smaller wallets.
Instead of a fair payout where all UST holder gets 30 cents for every 1 UST at the time of depeg, it uses a bottom-up approach where the payout prioritizes holders with the smallest balance and there is a cap on how much paid out to whales.
This proposal also saw support from multiple crypto leaders like Zhao Changpeng, founder of Binance and Vitalik, founder of Ethereum.
Justin Sun, the founder of Tron network, also fully support this proposal and pledge to commit $10 million USDD to help UST holders recover their funds.
Unfortunately, this proposal is bound to fail as it is essentially letting the whales absorb the losses. The whales are against this proposal and are not on board to pass the proposal.
At the time of writing, no proposal has been passed yet but it looks like the whales are supporting Do Kwon’s proposal to fork Terra.
Conclusion
Personally, I think that forking the Terra chain doesn’t bring any true value to the chain. While there are many incentives to keeping the Terra network working, if the airdropped token has no value, token holders would also abandon the network.
As expected, 90% of the participants in the preliminary vote were against Do Kwon’s proposal to fork the chain. It is important to note that the poll is not indicative of the true outcome because it doesn’t account for voting power.
Looking at the current situation, I would go with Fatman’s proposal. I think that LFG should just compensate all the UST holders. While this would end Terra, it will help the many struggling UST holder to tide through this tough time.
[Editor’s Note: This article does not represent financial advice. Please do your own research before investing.]
Featured Image Credit: Chain Debrief
Also Read: No Coin Is Too Big To Fail: How To Survive The Crypto Bear Market In 2022
