Do Kwon’s idea involves paying compensations to UST and LUNA holders who were unable or unwilling to sell their assets during the collapse of prices

Terraform Labs CEO proposed plan to revive the Terra ecosystem

14.05.2022 - 08:00

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2 min

What’s new? Terraform Labs co-founder Do Kwon made a proposal to restore the Terra ecosystem after the UST stablecoin lost its peg to the dollar and its rate had been dropping to $0,03. Kwon’s idea involves paying compensations to UST and LUNA holders who were unable or unwilling to sell their assets during this week’s price collapse.

Information on the Terra website

What plan has Kwon voiced? He suggested that validators restart the network with 1 billion tokens distributed to LUNA and UST holders, as well as a community pool to fund future development.

  • 40% of the distributed tokens would be received by holders who held UST at the time of its depegging from the dollar;
  • 40% would go to UST holders on a pro-rata basis at the time of the network upgrade;
  • 10% would go to LUNA holders at the time of the network halted operations;
  • 10% would be allocated to the project development fund.

As of May 14, UST is trading at $0,14, having added more than 20% in value per day, according to Binance.

What events happened before? On May 8, the UST stablecoin lost its peg to the US dollar and continued to fall over the following week, hitting $0,03. The rate of the LUNA token securing it also collapsed to almost zero at $0,00002.

On May 9, the Luna Foundation Guard (LFG), a non-profit organization created to support the Terra ecosystem, reported plans to regain the pegging of the stablecoin to the dollar. The LFG would provide a $750 million BTC loan to over-the-counter trading firms, as well as a $750 million UST loan to accumulate bitcoins as the market normalized.

On May 12, Terra reported that it would burn 1,38 billion UST to regain the pegging. The LFG issued nearly 7 trillion LUNA tokens to protect against attacks and capture control during the voting.

On May 13, the Terra network suspended operations to develop an ecosystem recovery plan. The Terra community later proposed rolling back the network before the collapse of the UST rate.

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