Despite an impressive collapse and the disappearance of nearly $ 60 billion, Terra will revive a blockchain and cryptocurrency project.
Some had buried it, but the Earth’s ecosystem will rise from its ashes. In any case, this is what Do Kwon, the founder of the LUNA cryptocurrency and the UST stablecoin, and the members of the community are hoping for. They voted overwhelmingly in favor of its Proposition 1623, which plans to revive the Terra blockchain and create a new cryptocurrency.
Less than a month after the impressive collapse of the Earth, it seems that the ecosystem could then restart. Community members were asked to vote on a governance proposal, presented by Do Kwon. The result was known in the afternoon of May 25, 2022: 65.5% of the participants accepted the relaunch of the project. 20.98% of the participants abstained, 0.33% voted no and 13.20% voted no with a veto.
A difficult recovery
Terra’s resumption is scheduled for May 27. Major 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 Moon Classic tokens. The new cryptocurrency will be called LUNA.
- The 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 holders pointed in the Anchor protocol, calculated on their possession before the fall of the project,
- 10% for LUNA owners, calculated on their possession after the failure of the project,
- 15% for UST holders, calculated on their possession after the bankruptcy of the project.
Despite the approval of the recovery plan, the recovery promises to be difficult for Terra. Investors will surely take the time to trust blockchain again after its setbacks, and it is not certain that new cryptocurrencies will one day regain the popularity or value they had before the crash. Nothing says that former Luna owners who hope to be reimbursed through the distribution of new tokens will be able to do so.
For Terra, the problems began when one of the two blockchain cryptocurrencies, the UST stablecoin, lost its peg to the dollar. To get it back on its feet, Do Kwon and the Terra teams chose to create more LUNA, Terra’s other cryptocurrency, which was supposed to bring it back into balance.
But the maneuver was not enough, and it even dragged the MOON down. In early May, a UST was worth $ 1 and a LUNA was trading around $ 80. Now, a UST has a value of $ 0.088 and a MOON of $ 0.00018. In all, Bloomberg estimates that the Terra accident cost $ 60 billion in losses.