Riding The Wave News Summary #42
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Table of Contents
Tweets
Do Kwon’s Proposed Terra ‘Revival’ Puts UST, LUNA Holders in Charge
‘Stable in Name Only’: Stablecoin Issuers Speak Out as UST Craters
Tweets
Do Kwon’s Proposed Terra ‘Revival’ Puts UST, LUNA Holders in Charge
Terraform Labs founder Do Kwon, in a forum post submitted 30 minutes ago, proposed a “Terra Ecosystem Revival Plan.”
Kwon’s “Revival Plan” amounts to a restart of the entire Terra blockchain, with network ownership getting distributed entirely to UST and LUNA holders through 1 billion new tokens.
The plan comes as Terra’s terraUSD (UST) stablecoin, which is supposed to be pegged to the price of $1, “death spiraled” below 15 cents this week – wiping out over $30 billion in value. UST’s sister token, LUNA, which propped up the stablecoin’s value, has fallen to below a penny (LUNA was worth above $80 just a week ago).
“Even if the [UST] peg were to eventually restore after the last marginal buyers and sellers have capitulated, the holders of Luna have so severely been liquidated and diluted that we will lack the ecosystem to build back up from the ashes,” Kwon wrote.
He continued, “UST holders need to own a large share of the network, as the network’s debt holders they deserve to be compensated for the tokens they have been holding to the end.”
Unfortunately with how the situation has developed and the information that has been released, it’s looking like this situation will go less the route of attempting recovery & more the route of prioritizing who should be paid out damages. Of course, what the creator is saying doesn’t guarantee the doom of the project but it increases the likelihood even more than it was already at.
What Happened to the $3.5B Terra Reserve?
Where’d that $3.5 billion go?
Unless you’ve been off the grid for the last couple weeks, you likely already know that the $3.5 billion of bitcoin that was created, in part, to defend and support the TerraUSD (UST) stablecoin, which proved to be anything but. However, while it’s clear that untold billions in value and wealth were lost when those reserves proved inadequate to prevent a depegging, what no one knows is what happened to those reserves and where they are now.
Terra Labs CEO Do Kwon has said via Twitter that documentation regarding the use of the reserves during the depegging event would be forthcoming. Where the Bitcoin is held and how it was used will be vital for investors seeking to recoup losses suffered through their exposure to UST, according to Tom Robinson, co-founder and chief scientist of Elliptic, a blockchain analytics firm.
The purpose of having a very large reserve of Bitcoin was potentially to purchase UST to push the price back up toward $1, which is probably the reason it was sent to exchanges, but it’s not possible using the blockchain alone to identify whether it was sold to support the UST price, Elliptic’s Robinson said.
This left 28,205 BTC in Terra’s reserves. At 1 a.m. UTC on May 10, those remaining reserves were moved in their entirety, in a single transaction, to an account at the cryptocurrency exchange Binance.
Beyond the fact that the mechanism to keep the currencies peg to the USD failed there isn’t much information available. Hopefully, the information from the projects postmortem is released publicly so that the crypto community as a whole can learn from it and take precautions to avoid future bank-run-like situations. Part of the peg failing to hold may have been due to Bitcoin’s recent drop in price which lowered the number of assets available to be used to maintain the peg.
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