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The luna price, which was trading as high as $100 per luna just last month, crashed to near zero this week—causing the algorithmic stablecoin UST to completely lose its peg to the U.S. dollar—amid a $1 trillion crypto crash that sent the bitcoin price down by over 20%.
Now, the chief executive of UST and luna developer Terraform Labs, Do Kwon, has pitched a revival plan that could see ownership in the network distributed across UST and luna holders—causing the luna price to surge over 1,000% as traders bet the project could recover.
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“While UST has been the central narrative of Terra’s growth story over the last year, the Terra ecosystem and its community is what is worth preserving,” Kwon wrote in a post on a Terra discussion forum, adding the Terra community “must reconstitute the chain to preserve the community and the developer ecosystem.”
The reconstitute—effectively a restart of the terra blockchain—would create 1 billion tokens to be distributed among various community stakeholders, with 40% going to luna holders before the UST de-pegging, 40% to go to UST holders “pro-rata at the time of the new network upgrade,” 10% to luna holders before the chain halt, and 10% to the “Community Pool to fund future development.”
The blockchain underpinning luna and UST was shut down multiple times this week to “prevent governance attacks” following “severe [luna] inflation.”
Terraform Labs and the Luna Foundation Guard, tasked with supporting UST, this week printed several billion luna tokens—increasing the luna supply from 340 million last week to 6.5 trillion—in a failed attempt to maintain the UST peg to the dollar.
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“Terra needs a community to continue to grow and make its blockspace valuable again—the only way to do this is to make sure that token holders before the attack commenced, the most loyal community members and builders, stick around to keep providing value,” Kwon wrote, adding, the ecosystem will not survive “in its current state.”
In a follow-up tweet thread, Kwon said he’s “heartbroken” about the collapse of luna and UST but said he’s confident the “community will form consensus around the best path forward for itself and find a way to rise again.”
Others in the crypto community have also suggested the project could still survive in some form with Binance chief executive Changpeng Zhao, often known simply as CZ, saying there has been “progress” made.
“Luna blockchain resumed, no more minting,” CZ posted to Twitter. “And deposits, withdrawals and trading resumed. Trading is important for existing holders.”
The luna and UST collapse this week came amid a bitcoin, ethereum and wider crypto market downturn that made UST vulnerable, with some speculating there may have been an orchestrated attack on the stablecoin.
“The pullback in general markets created the conditions for an attack on UST, which was inherently fragile,” Cory Klippsten, the founder and CEO of bitcoin-buying app Swan Bitcoin, said in a Telegram message, adding, “the effects of the unwind are wide reaching, and the ultimate magnitude still unknowable.”