The Terra Rescue story continues to unravel. In a tweet thread, the CEO of Terra Money Twitter account TerraForm Labs, went into more detail about Do Kwon’s rescue plan for UST.
Thread 1164 highlights Do Kwon’s initial strategy for Terra, Proposition 1164 from May. The proposal will better balance the algorithmic stablecoin UST by expanding the base pool for the currency. The proposal has received 220,000 votes, over 50%.
The tweet thread also points out that UST has a “supply overhang” that is less than Luna’s “thinning“(or price depreciation). As a result, they now have to burn more UST:
“The primary hurdle is to rapidly pull bad debt out of UST circulation at a clip so that the system can restore the health of on-chain spreads.”
As a result, there are three emergency measures to implement, one of which focuses on burning more UST:
3/TfL is also launching three more emergency actions:
1. Proposal to burn the remaining UST in the community pool.
— Terra (UST) Powered by Luna (@terra_money) 12 May 2022
2. TfL will burn the remaining 371 million UST cross-chain on Ethereum.
3. TfL just bet 240 million $luna To protect against network governance attacks.
The so-called Agora proposal vote is imminent, shared by user “the intern” on the Terra Research forum. Overall, the total amount of UST burned in Bern should lead up to 1.4 billion UST, or “11% of outstanding UST liabilities,” the site description.
In short, the team hopes that expanding the base pool for the coin and burning more should lead to savings in UST.
Point three, related to the 240 million LUNA stake, will reportedly strengthen the network governance of the TERRA ecosystem.
However, for some observers, staking 240 million LUNA (equivalent to approximately $200 million dollars) is not enough to save the project:
With respect to 3, the way things are going, you’re going to need a stake of over 240 million $luna To ensure the security of the network. $luna Crashing in price and not restoring peg is also a problem, the more time it takes $luna is molded.
— meto (,️) (@hodlmastermeto) 12 May 2022
Other commentators have suggested that Proposition 1164 would actually be to accelerate The ongoing “death spiral” of Luna and UST.
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Cointelegraph previously reported that the crypto community was quick to call Dou Kwon’s algorithmic stablecoin. At the same time, extraordinary theories have also been shared regarding a planned “attack” on the systemic ecosystem by competing players.
