Terra backers vote to revive luna — but not UST — after $60 billion crypto collapse

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  • Supporters of Terra have voted to revive the failed cryptocurrency venture without its controversial UST stablecoin.
  • The proposal will lead to the creation of a new Terra blockchain and its associated Luna token.
  • UST, a so-called “algorithmic” stablecoin, fell below its intended $1 peg earlier this month, triggering a sharp selloff in the cryptocurrency.

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Supporters of Terra have approved plans to revive the controversial stablecoin’s now-failed cryptocurrency venture that helped trigger its surprise demise two weeks ago.

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“With overwhelming support, the Terra ecosystem has voted to pass Resolution 1623, which calls for the origin of a new blockchain and the preservation of our community,” Terra’s official Twitter account posted on Wednesday.

The proposal would lead to the creation of a new blockchain—a shared ledger of transactions—and its associated Luna token, which is now worthless after investors collectively ran into the crypto equivalent of a run on the bank.

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Earlier this month, TeraUSD, a so-called stablecoin, fell below its intended $1 peg. This caused panic in the crypto market, with investors dumping its sister token, Luna.

TeraUSD, or UST, is known as an “algorithmic” stablecoin. Through some complex engineering, it was designed to maintain its dollar value through the creation and destruction of UST and Luna, which would – in theory – help balance supply and demand.

This is different from how many major stablecoins such as Tether and USDC are meant to operate – as actual fiat currency is held in reserve to support dollar pegs in case customers withdraw their funds.

At its height, Luna and UST had a combined market value of approximately $60 billion.

doubts abound

Under the new proposal, Terra plans to distribute tokens to holders of the old Luna – soon to be renamed “Luna Classic” – and the UST token.

About 30% of the tokens will go to the pool of investors in the Terra community; 35% will go to those who held Luna before her fall; 10% for pre-compressed UST holders. Another 25% of the tokens will be allocated to traders who still own Luna and UST after the crash.

According to data from CoinGecko, Luna is up more than 20% on Wednesday. UST was up more than 50%.

Many market observers remain unconvinced Terra’s revival plan will work.

“Overall confidence in the Terra project has fallen drastically,” said Vijay Iyer, Head of International at Luno Crypto Exchange.

“It’s a very crowded space with many already well-connected platforms with lots of developer activity. I don’t know why Terra would be successful here.”

The Terra debacle has eroded investor confidence in bitcoin and the broader crypto market, which have collectively lost nearly $600 billion in value in the past month alone.

Regulators are getting worried, with the likes of Federal Reserve President Janet Yellen and European Central Bank President Christine Lagarde calling for immediate regulation of crypto – particularly stablecoins.

Credit: www.cnbc.com /

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