By Nathan Ferguson
Since the fall of the LUNA token after the UST stablecoin was de-pegged from $1, the co-creator of the Terra Network has been developing a recovery plan for the entire system.
His first proposal which was ditched by the Terra users is to redistribute the tokens to users and abandon the UST stablecoin completely. Since this is not looking viable, he made another proposal recently. His new plan is to split the blockchain into two (technically called Hard-Forking) to produce a new token called Terra Classic, just like Ethereum was forked from Ethereum Classic.
He proposed the community today and titled it “Terra Ecosystem Revival Plan 2.” With this plan, the blockchain purist will keep the current blockchain, and it will be named Terra Classic while the name of the token will be LUNA Classic (LUNC). On the new chain, developers and those holding UST will receive an airdrop from the 1 billion LUNA token pool. This also includes those that are holding LUNA or have staked it before the stablecoin was de-pegged.
In order to avoid a sharp decline in the value of the token because of the airdrop, the redistribution will have a scheduled lockup and vesting. With this, Terra will figure out how to move on without revolving around UST.
Last Friday, Kwon shared the content of his first proposal where he said Terra is more than the UST stablecoin, which suggests that they should look beyond it. However, he shared in a Twitter thread that there are competing interests among the stakeholders in the community, and there is no consensus currently. According to him, the options on the ground are to either start a new blockchain afresh or stick with the one that collapsed.
The price of the UST stablecoin is expected to be pegged to a US Dollar based on its relationship with the governance token of the Terra community, LUNA. Based on this relationship, the reality is that if UST falls below $1, traders can acquire it more and covert it to the dollar equivalent of LUNA. However, what keeps the system running is that most traders have reasons to hold LUNA. One of them is the high-interest rates of Anchor, a lending protocol launched by Terra.
As soon as the interest rates were reduced, the value proposition of LUNA began to reduce, and in response, users began to dump the token and this is what led to the death spiral of the LUNA and UST tokens.
Up to date, there is no response from the Terra community, but they have up to May 18 to make a decision. If approved, the plan will be executed by May 27.