As Terra approaches zero, Do Kwon promises a “Return to Form”


On Wednesday morning, Terraform Labs CEO Do Kwon emerged from the shadows to reveal a strategy to rescue Terra. Nevertheless, the teetering environment hasn’t gained much trust as a result of this.

The CEO of Terraform Labs issued a twitter storm on Wednesday in which he addressed Terra’s continuing problems and proposed a way forward for the ailing network. In order to make it through this crisis, I am committed to working with everyone of you, and together, we will find a solution. Kwon wrote.

Kwon pointed out that UST is still trading below its $1 peg, and said that Terra’s dual token process is consuming the algorithmic stablecoin’s supply. Taking on so many stablecoins at once has pushed the on-chain swap spread over 40%, and Luna’s price has dropped significantly as a result, according to Kwon. “The only road ahead will be to accept the stablecoin supply that wants to depart,” he continued.

The algorithmic stablecoin UST and the volatile token LUNA form the backbone of Terra’s ecosystem. In Terra, people have the option of burning 1 UST to produce 1 LUNA, or the other way around. This encourages arbitrageurs to keep UST’s price stable, which theoretically implies that it should always trade at $1.

Despite Terra’s incredible success in the last year, the company has been put through its greatest stress test yet in recent days. A depeg event at $0.98 over the weekend saw LUNA and UST plummeting this week as investors’ faith in the initiative dwindled. At the time of this writing, UST is trading at $0.33, whereas LUNA has dropped 97% in the previous 24 hours. In January 2021, LUNA was trading at a high of $119 (in perspective, this was only five weeks earlier). Terra’s market capitalization has plunged from $30 billion to $624 million in only a few short months.

Proposal aims to speed up the minting of LUNA coins

In order to assist UST get back to its peg, Kwon has authorised a patch that will see Terra’s daily minting capacity increased. As of this writing, 56.66 per cent of Terra’s LUNA token holders has voted in support of a proposal to boost Terra’s minting capacity to $1.2 billion on the Terra governance forum (43.34 percent of voters have abstained, and no one has voted against). Vote threshold has already been met.

holders of USTs may get out of their holdings by issuing more LUNA than they can now (the present issuing capacity is just $293 million) if the idea passes. In the short term, this implies that LUNA will be under even greater pressure to make a profit. When UST returns to $1, LUNA might stabilise, according to the suggestion, which highlighted the possibility for pressure. In an extract, the following was stated:

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