After Crypto Collapse Terra Backers Vote to Revive Luna
Backers of Terra have passed a plan to restore the failed cryptocurrency venture — without the controversial stablecoin that helped to solve the problem and its attractive ending two weeks ago.
“With too much strong support, the Terra ecosystem has voted to pass the proposal, calling for the starting of a new blockchain and the safety of our community,” it was said Terra’s official Twitter account on Wednesday.
The proposal would lead to the creation of a new blockchain — a shared ledger of all the transactions — and its associated luna token, which is now wasteless after investors fled in masse in the crypto equivalent of a run on the bank.
The previous month, terraced, a so-called stablecoin, dropped below its intended $1 peg. That led to a panic situation in the crypto market, with investors collecting its sister token, luna.
TerraUSD, or UST, is also known as an “algorithmic” stablecoin. Through some complex engineering. It was designed to maintain its dollar value through some creation and destruction of UST and luna, which would — in theory — help balance supply and demand in the market.
That’s different from how many major stablecoins, like tether and USDC, are meant to work — as in, with actual fiat currency held in a reserve to assist the dollar coin in the event clients withdraw their funds.
At their height, luna and UST are having a combined market value of almost $60 billion.
Under the new proposal, Terra plans are there to distribute tokens to holders of the old luna — soon to be named “luna classic” — and UST tokens.
About 30% of tokens will go to a pool of investors in the Terra community; 35% will go to those who held luna before the crypto crash; 10% to pre-collapse UST holders. A further 25% of tokens will be utilized by traders who still own luna and UST after the crash.
Luna increased more than 20% Wednesday, according to CoinGecko data. UST was up over 50%.
Many market observers were not convinced by Terra’s revival plan will work or not.
“There has been a huge loss in the level of confidence and overall in the Terra project,” said Vijay Ayyar, head of the international level at the Luno crypto exchange.
The Terra debacle has entrusted investors’ confidence in bitcoin and the broader crypto market, which has collectively lost roughly $600 billion in value in the previous month alone.
Regulators are becoming more concerned, with the likes of Federal Reserve Chair Janet Yellen and European Central Bank President Christine Lagarde calling for urgent regulation of crypto — especially stablecoins.