Community terra (cust)

Summary
Objective of this proposal is to create a new decentralized AFT which can automatically be pegged to 1$ and defend the peg value during market volatility.

Motivation
Terra’s core existence was based on the idea of decentralized money. Though the initial creation of UST (currently USTC) has failed to succeed, it is not the end of road for decentralized money. New attempts are made by several users to create decentralized money and this is one such idea towards it.

INTRODUCTION

As mentioned above, Terra’s core existence was based on the idea of decentralized money. Though the initial creation of UST (currently USTC) has put the community in lot of troubles due to the de-peg event, there are lots of discussion, time and research spent on repegging USTC to $1 by several community members. I want to put forth the below points of concern before I discuss on my proposal.

  1. There are several community members who advocate that it is highly unlikely to generate sufficient funds to repeg to 1$ (through any sources like fund raising / self-initiative burn / others). Have made attempts with few logics on the possibilities of repeg to 1$ and due to huge bad debts none of my attempts were fruitful. Though I am not ruling out the possibility of repegging USTC to $1, which can be brought to the table by bright minds in the community, I couldn’t arrive at any possible solutions for the same.

  2. There are large amounts of USTC held by whales as the current top 10 USTC holders hold a significant amount compared to the rest of the market. Even if we end up with a solution of 1$ repeg, it is highly likely that whales with sell USTC and exit the market with good profits and the small holders will again pay the price of losing their hard-earned money. I see this as yet another risk and not in favor of working on the current USTC. Besides that, there are unforeseen legal implications for which I don’t have any insights to it.

  3. Luna Classic is now a community owned chain and working towards achieving decentralization at its highest level possible. Hence, I am in favor of a decentralized community owned coin. The idea of UST was created as decentralized community owned coin, however, the current situation of USTC has created uncertainty on USTC decentralization. This leads us to the question, what is the way forward?

After careful consideration, I have arrived at the conclusion to move away from USTC for the above 3 reasons. I would suggest to create a new community coin as the way forward for the betterment of rejuvenated LUNC community.

ALGORITHMIC FUNGIBLE TOKEN — COMMUNITY TERRA (CUST)

Crypto prices are derived based on supply and demand which leads to high volatility (speculative pump and selloff) where volume also plays a crucial role in fear of missing out (FOMO). However, objective of the new AFT should be decentralized and not have volatility irrespective of volume, supply and demand. In order to overcome these challenges, I propose that the AFT be adequately backed up with a digital asset. There were proposals initiated by “Alex Foreshaw” earlier, by creating a backup fund with BTC (twBTC), however, I propose to create a backup with the native asset (LUNC) which will also serve the purpose of its very own existence in first place.

Yes, you read it RIGHT. I mentioned LUNC as the asset which should back up the new AFT (CUST). The first question everyone will have is “Why should LUNC be considered as the back up asset when LUNC itself is on life support?” LUNC (formerly LUNA) was the native asset to back the UST but the flawed design led to the death spiral and crashing of the coin. With a modified approach, LUNC can act as a savior and add more value to the chain. This will create more demand to the coin and will also stay decentralized. To control crypto volatility (to a practically possible extent), I propose a pool be created where funds will be accumulated to control volatility. This pool will release funds whenever there is high volatility and so that the AFT stays pegged to 1$ to a maximum possible period. Incase of a de-peg, measures are in place so that it gets pegged as early as possible.

Being decentralized, if Bitcoin can be considered as a standalone store of value without dependency on any assets (like FIAT, gold, digital et al.) why cant LUNC thrive as standalone asset like bitcoin when the chain is decentralized. That’s the very same reason of considering LUNC as backup asset. LUNC will only fail when there are no utilities to the chain, which is the one of the primary reason why a new AFT is required at this point in time to add more value and benefits to the community members.

PROPOSAL

As part of the proposal 5234, tax was reduced to 0.2% and 10% of the collected seigniorage gets added to the community pool at the end of the epoch. The rest 90% of the tokens are not regenerated as it is burnt based on community decision. Objective of this text proposal is to utilize the burn tax funds to mint new Algorithmic Fungible Tokens with proper reserves and refill Oracle pool rewards. New pools are to be created and the funds should be distributed as below from the current tax rate of 0.2%.

  1. Community Pool — 10%

  2. Reserve Pool — 10%

  3. Oracle Rewards Pool — 20%

  4. AFT Pool — 60%

Community Pool — 10% (No Changes)

Reserve Pool — 10%

10% of the tax volume should be sent to LUNC Reserve Pool. Until DEX is operational in LUNC chain, funds will be accumulated in LUNC. Once DEX is operational, LUNC should be periodically converted to BTC, ETH, BNB which will act as a backup for buy back and burn at a later stage. Funds will be divided equally based on the number of coins chosen in Reserve Pool. To start with, we can go with the top 3 coins of BTC, ETH, BNB. More alt coins, if required, can be added at a later stage.

During bull run / when the reserve coin domination against LUNC is high, LUNC will be bought back and burnt through a governance proposal with 50% of the reserve funds. These reserves will also back up during any market conditions when LUNC is weak. Hence maintaining a reserve pool becomes a necessity for the chain’s long-term growth.

Oracle Rewards Pool — 20%

Oracle Rewards are slowly depleted and needs to be refilled at some stage. Allocating 20% of coins from tax will replenish the rewards pool and encourage more users to stake. In addition to the portion of rewards from tax, the to be created Algorithmic Fungible Tokens (AFT)* will also be sent to the rewards pool which will be discussed in the next few pages. These AFTs will also be distributed as staking rewards.

If ORD is to be funded by other means, this 20% of 0.2% tax should be directly credited to Volatile Control Funds and will remain out of circulation.

AFT Pool — 60%

The most important section of this text proposal is the AFT Pool. AFT Pool (60% of tax funds) is further segregated into 3 sub-pools. Break-up % for the pools is as below.

  1. Volatile Control Funds (VCF) — 60%

  2. LUNC Collateral Funds (LCF) — 20%

  3. CUST Pool — 20%

The purpose of creating 3 pools is that the 1st pool (VCF) will act as volatility controller which will play a vital role in rebalancing the peg value on 1:1 basis. The 2nd (LCF) and 3rd pool (CUST) will have the same % of funds flowing in the respective pools so that $ value remains 1:1 at the time of allocation. VCF Funds will start to rebalance any LUNC price variations as its only existence is to control the price variations and keep the peg value on 1:1 basis.

**‘x’ amount of LUNC equivalent to 1 $US = 1 CUST

Let me share a sample calculation of the tax amount distribution & AFT pool usage with the below data.

Table 1 — Transaction and Burn Tax Volume

Table 2 — Proposed Tax Funds breakup in lieu of LUNC Burn

Table 3 — Community Terra (CUST) Generation

Table 4 — VCF rebalancing CUST pool when LUNC price increases from $0.00017

Table 5 — VCF rebalancing LUNC Collateral pool when LUNC price decreases from $0.00017

As seen above in table 4 & 5, VCF releases funds to LCF / to mint CUST (by burning LUNC) during price fluctuations in order to retain the peg. Lets check the scenario what happens during price pumps 35X and immediately drops 90%. 35X price pump is explained in table 4. CUST will remain pegged in normal market conditions and control volatility to a practically possible extent. The scenario here describes extreme market conditions. CUST cannot hold the 1$ value in such extreme market conditions and this is temporary as there will be continuous inflow of funds to VCF based on transactions and it will start distributing funds to LCF to balance the peg. Eventually, it will return back to 1$ in some time. The temporary de-peg time is based on the amount of LUNC deficiency in LCF to retain the peg value.

With the current proposal (and assuming both pump and selloff happens before next epoch, i.e. no refilling of funds to VCF), VCF will be drained to from 48.68M to 0 and a bad debt of $100K will remain. LCF will have 72M. As such CUST price will be $0.3 when this happens. The below calculation is considering that LUNC directly drops from $0.006 to $0.0006. As the pump and selloff is going to happen in stages (even if it is calculated hourly), CUST price is definitely expected to be more than $0.3.

Table 6–90% Drop after LUNC Price pump

The reason why I mention the de-peg to be temporary is that VCF will consistently receive funds every epoch which in-turn will be transferred to LCF to fulfil the LUNC deficit of 163M (~$100K) or lesser. In the mean-time if LUNC price starts to increase, the LUNC deficit will start to decrease thereby increasing CUST value. Until CUST is repegged to $1 this will continue to happen.

In addition, we can send LUNC to VCF from community pool, use the reserves funds in BTC/ETH/BNB to buy back CUST from open market and do a burn, burn CUST in ORD pool until CUST is repegged back to 1$. If anyone does voluntary funding to VCF (like the current voluntary burn), the entire amount will be sent to VCF instead of splitting 60:20:20. Meaning VCF will have more LUNC than 3 times the value and will be able to stabilize the downfall. The final CUST price in such scenario will definitely a lot more than $0.3. Leaving it for financial experts’ opinion.

To minimize the risk of hyper minting CUST during LUNC price pumps and to defend the peg incase of huge selloffs, we need additional control mechanism.

Volatile Control Risk Limit (VCRL)

VCRL factor is set to determine the acceptable LUNC price variation limit during market volatility for minting CUST. Reason for introducing this factor is to avoid over minting CUST during toxic price pumps thereby reducing the risk of de-peg during market huge selloffs. Factoring 2 components, current LUNC price and lowest of last 3-day LUNC price to determine the VCRL factor and comparing the price variations of current LUNC price against the lowest of last 3-day LUNC price.

Below is the observation for the period Jun 1, 2022 to Nov 23, 2022 (Source of LUNC Price: Coinmarketcap)

Table 7 — Price variation comparison of current LUNC price against the lowest of last 3-day LUNC price

Assuming LUNC Market Close price to be Current Price:

34 out of 176 days had a price increase of more than 1.2X against the lowest of last 3-days price.

Assuming LUNC Market High Price to be Current Price:

56 out of 176 days had a price increase of more than 1.2X against the lowest of last 3-days price.

Based on the above analysis, VCRL factor is set as 1.2

My previous article (Community Terra — CUST) was based on the fact that irrespective of LUNC price increase, VCF will start burning LUNC and mint CUST to retain the peg. However, to avoid over minting CUST during price pumps and to reduce the risk of de-pegging during huge LUNC selloffs, introducing the VCRL into the play.

Acceptable VCRL: Current Price Variations up to 1.2X of last 3-day lows

VCF will burn LUNC and mint CUST equivalent to the total value of LCF funds. CUST will have a healthy mint within acceptable volatility range.

Extreme VCRL — Current Price Variations above 1.2X of last 3-day lows

VCF should not mint CUST as this is the RED ZONE which could lead to undesirable minting volume. To retain the peg and not to allow CUST price go beyond 1$, LCF funds should start burning LUNC (without minting CUST) to meet the equivalent value CUST holdings. i.e. LCF will start to offload its excess holdings via burn to defend the peg.

As long as the price variation is in extreme VCRL range, VCF will remain static and will keep accumulating LUNC (in VCF) that are distributed from transaction volume. Accumulating more funds in VCF will save CUST defend the peg to a larger extent. Once the current price variations against the lowest of 3-day price falls below extreme VCRL (i.e within acceptable VCRL range) VCF will start to burn LUNC and CUST minting gets enabled.

Conditions:

  1. Value of Volatile Control Funds should be greater than or equal to 3 times*** of LUNC Collateral Funds and CUST Pool.

  2. If Volatile Control Funds value falls less than 3 times the value of LUNC Collateral Funds / CUST value, no funds should be sent to LUNC Collateral Funds / CUST Pool. Instead, the 40% (20% + 20%) should be sent to Volatile Control Funds to increase its hold above 3 times value.

  3. LUNC Collateral Funds Value is always pegged equivalent to CUST Pool Value. The equivalent CUST value is derived based on LUNC Collateral Funds value. Most of the scenario it remains as 1$ as it is pegged proportionately.

  4. When LUNC Price goes down, Volatile Control Funds should be sent to LUNC Collateral Pool to peg the value equivalent to CUST Pool Value

  5. When LUNC Price goes up, Volatile Control Funds should be burnt and CUST generated in AFT Pool to peg the value equivalent to LUNC Collateral Funds Value

  6. If the Volatile Control Funds falls less than 50% of the total holdings (LUNC Collateral Funds + CUST Pool), community governance voting is initiated to send 10% of Community Pool Funds to Volatile Control Funds.

  7. When current price variation goes above VCRL (1.2X), CUST mint should not happen. Instead, LCF should release funds from its pool and burn the released funds so that VCF does not lose out its supply by hyper minting CUST which is required to defend the peg during huge selloffs. During this period, VCF can keep accumulating funds and increase its holdings so that it has more supply to defend pegs during downtrends.

NOTE

*Minted AFTs are made available in oracle pool (ORD) which is distributed to all stakers.

** Refer Table 4 & 5 which illustrates how ‘x’ amount of LUNC value is equated to CUST value during price volatility ↑↓

*** 3 times is determined based on the acceptable control limit to stabilize the $ peg value at times of high volatility

Market Swap

The current AFT plan requires collateral and volatile control funds to defend the peg. My initial thoughts about market swap got clouded with this scenario as funds has to be distributed to balance and defend peg. To describe with an example, lets say you want to swap 1M LUNC (@$0.00017) and in ideal situation you would expect to get 170 CUST ($170). This is not the scenario that will happen based on the current proposal. To mint 1$ in CUST, VCF and LCF should be funded with $3 and 1$ equivalent LUNC respectively. i.e. if market swap is to be enabled then it would mint you only $34 (as 600K LUNC equivalent to $102 + 200K LUNC equivalent to $34 will be sent to VCF and LCF respectively to defend the peg). This was the primary reason why I couldn’t factor market swap earlier.

Thanks to some of the community members to make me reconsider this. A thought occurred my mind to make it is a possible option in theory. While technical challenges in reality are completely different from theoretical expectations, only the developers can comment on it.

Restricted Market Swap:

To defend the peg, both VCF and LCF should have adequate funds. The possibility of market swap with the current proposal has its own limitations. To have a fair distribution of CUST and / sustain volatility, Market Swap condition should be TRUE as shown in below table. Until LUNC total supply reaches 10B, one way market swap of LUNC to CUST should be enabled.

Table — 8 Market Swap Conditions and Daily Swap Limit per wallet

#CUST Refill Period — If CUST in ORD falls below 500K CUST, market swap should be disabled temporarily, i.e. until CUST supply in ORD is refilled to a minimum sustainable level set as 1.5M CUST. Once ORD cross the required threshold limit of 1.5M CUST in ORD, it should move away from Refill Period and market swap will immediately be enabled to all users. This process will follow in a loop, so that market swap gets enabled when ORD supply is greater than 1.5M CUST and gets disabled when ORD supply falls below 500K CUST. Reward distribution to stakers will be enabled at all times.

As CUST minted in ORD already has the backup funds in LCF to retain peg, market swap will result in exact equivalent value of CUST. i.e. based on above example 1M LUNC will be burnt and $170 CUST will be directly released to user wallet from ORD (or mint CUST in wallet and directly burn the exact numbers from ORD). I am not sure on the technical functionalities, hence suggesting that either one of the options should work so that there is no change in CUST supply and remains pegged. This will also speed up the removal of LUNC from total supply.

Market swap fees collected in LUNC should be sent to VCF to increase VCF holdings so that it can defend peg value during market selloffs.

CONCLUSION

First of all, I would like to extend my gratitude to all of you for taking time in reading the text proposal of creating new AFT, a real community owned not so called a stable coin, but a low or no volatile coin in normal market conditions. I strongly believe that CUST will revive decentralized money. Like LUNC reborn from the ashes, let CUST be born from the current burn tax.

I am open for any constructive feedback on this proposal. I have crafted this proposal with the best of my abilities and to bring more value to LUNC community. Please bear with me if any of my logics are incorrect. I am human too and tend to make errors or even may have missed out not considering critical factors.

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QUESTIONS:

After reading the proposal this far, some of you may have the following questions. Thought to provide more clarity as to why I believe the above proposal will age well with time.

1. Why should we utilize burn tax funds and not create new tax for funding the AFT?

Utilizing the burn tax is the best and viable approach without tax increase. Funds that are sent to burn will support for AFT creation and to support volatile control. This process is more like staking. The only difference is that in staking, user will have the option to unstake and these coins will come into circulation. However, the funds sent for AFT will act more like staking and cannot come into circulation unless we have a dire situation where we are forced to withdraw funds and reimburse the AFT holders in extreme situation, which, in my view is unlikely to happen. If we add another tax just for this purpose, it will once again increase the tax % which may not be a welcome approach to the new dapp / project developers. Effective utilization of funds with the current tax is the best solution to long term growth. As the current burn tax funds (LUNC) which are proposed to be utilized for AFTs will remain out of circulation it will serve the same purpose as that of burn tax. The only funds that will come to circulation supply is the existing 10% community pool, 10% for Reserves (for LUNC buy back and burn later) and the mint & create AFTs which will be distributed from community pool for all stakers.

2. Why should we not do a fund raising and keep it away from USTC?

Fund raising is not going to work as we need constant inflow of funds to increase CUST circulation. Fund raising on massive level will create the initial circulation, however, pools like volatile control funds and LUNC collateral funds require constant inflow of funds. Without the regular inflow of funds (from tax), this proposal will not see a sunrise and we will be back to the start for repegging USTC or to work on alternate options on new AFT. Creating CUST with burn tax amount doesn’t mean that we abolish USTC. USTC will be left aside for legal process and or until we have new ideas to repeg. It will remain in the ecosystem, but CUST will gain larger attraction if that becomes a success.

3. Is it possible to mint CUST by Terra Classic community members?

No, it is should not be allowed to manually mint CUST like the option we had for LUNA-UST. Existence of CUST should happen from the transaction volume. Higher the transaction volume, higher the circulation of CUST. Transaction volume is very much important from tax perspective and for funding projects through community pool. As long as transactions are done, the chain will remain alive and so does the AFT. Hence the circulation supply is also dependent on the transaction volume. What is the point in having large circulation supply if the chain is not alive (low transactions)? This way minting is limited, automated based on market conditions and remains decentralized.

4. Why is LUNC preferred over BTC as the backup asset for AFT?

Undoubtedly, BTC is the top asset class and is preferred coin over any asset to be set-up as backup funds. However, LUNC (formerly LUNA) was primarily created with the idea to create decentralized money through mint and is the native asset. If our community doesn’t support LUNC as backup, then who are we expecting support LUNC. Moreover, LUNC this as backup asset creates more value and we are increasing the scope for usage of LUNC. If we are to use BTC as backup asset, we have to sell LUNC (42%+ of burn tax value with the current proposal of VCF in addition to the LUNC sold to stack Reserve Funds) in open market where price of LUNC will be pulled down. Also, the amount of LUNC circulation will not reduce as per the current burn tax. If we use LUNC as the asset to backup AFT, then we don’t have to worry about utilizing the burn tax funds as these are locked and will never be released in circulation, except for a situation where we are forced to buy back AFT and burn which may not be required in the foreseeable future.

5. If we stop the burn process, will CEX still support for LUNC burn or redirecting funds (esp. Binance)?

If we stop the burn process, there are higher chances that CEX will not be interested to support us with the burn tax. Large portion of the burn tax is done by the top exchanges like Binance, Mexc Global and few others. However, if CEX initiated the burn tax to support LUNC community there will be a consideration for supporting the new proposal (I am purely speculating). We can request Binance and other CEX to redirect the funds to VCF instead of burn address. More the funds accumulated in VCF less the chances of losing the peg even if the price decreases more than 3X instantly. IF, and only IF, exchanges support this we can gain additional support in increasing CUST circulation and keep the peg intact during extreme situations. If CEX decide not to support, yes, we will lose the current privilege of large burn when CUST goes live.

6. How to list CUST in top CEX like Binance and other exchanges?

Honestly, listing in CEX will be a challenging process and CEX have their own listing process. Not sure if we as the community will be able to complete the listing process successfully. May be few experts on this matter can advise on it. However, my take is that when we are building decentralized money, we should not worry about CEX listings. We will have DEX platforms built on Terra Classic chain which will definitely support CUST, if we are able to launch it successfully. We can brainstorm on FIAT withdrawal options directly from Terra Station. We can also work on few DEX listings in long run. Eventually when this becomes a successful run, I hope CEX like Binance and others will support listing CUST.

7. What is the assurance that there will not be another death spiral?

While I cannot assure that death spiral will not occur with this approach, I am pretty much CONFIDENT that such situation will not arise. LUNA Death Spiral happened due to the mint mechanism where users tried to force mint to defend the peg. As the supply was unlimited, back-to-back mint caused the death spiral increasing huge volume of LUNC and USTC. This is one of the reasons why I am confident that a death spiral will not happen in this new approach. We currently have a hard cap of LUNC total supply to be 10B, which cuts down the possibility on indefinite minting. Even if the LUNC hard cap of 10B is removed in future, I am still confident that death spiral will not happen. CUST mint will happen only on these 2 occasions. 1. There are funds inflow and LUNC Collateral Funds value is equal to the CUST value. 2. Increase in LUNC price will increase the LCF value which will then be greater than CUST value. To balance the situation, VCF will start burning the LUNC and mint the deficient amount of CUST. I am not ruling out the possibility of de-peg if the VCF are exhausted. There are chances that it may happen due to extreme market conditions. However this will be only for a temporary period until the VCF is refilled from the inflow of tax funds. There will be no minting of CUST if de-peg happens and CUST falls below 1$. This is the very same reason why I mentioned that instead of burning lets send funds to VCF. There should be a provision made available for anyone to send LUNC to VCF instead of burn. Higher the funds in VCF, lower the chances of de-peg. As I am no financial or tech expert, I leave this to the financial expert’s opinion to identify the flaw in the logics while techies can create a simulation based on the proposal to check how the logic will work during extreme market conditions and revert if in case, I have missed out anything critical.

8. Why should funds be directed to Reserve pool?

We can still have these funds burnt, but, creating a reserve pool and backing up with top 3 coins like BTC, ETH, BNB will back up LUNC in not going down drastically. This reserve pool is different from AFT pool. The objective of this reserve pool is to create backup for LUNC. When LUNC is weak and other coins have higher value, we can buy back LUNC and burn in large scale. In-case of extreme volatility, these reserve pool funds can also be used to buy back CUST from panic sellers in market and be burnt to reduce circulation as well as to repeg the 1$ value.

9. Does it mean that Terra will have CUST as the only AFT in ecosystem?

No, not necessarily. CUST will be born out of burn tax whereas USTC and the newly proposed USTN are based out of market swap. There can be multiple AFTs in LUNC ecosystem (as long as they don’t have the same logic) and community will decide which one to use based on their preference and requirements.

10. What is the use case of CUST if it cannot be swapped to LUNC?

The use case for CUST is decentralized money and is distributed to all the stakers who protect the terra classic ecosystem. This proposal is not based on market swap, but, CUST can be traded on DEX for Fiat withdrawals or day to day trading against other coins. The idea of stable coins came into existence only to address the volatility. Arbitrary traders who had the opportunity to gain during de-peg are the only ones who will not gain much with this proposal as this proposal tries to keep away the volatility during normal market conditions. If CUST can address the volatility with a practical control measure, there is no stopping of traders to use CUST during bear market or whenever traders want to stay away from extreme market conditions. CUST can also be used to pay developers.

11. Is CUST an inflationary coin?

Yes, CUST is an inflationary coin as there are no cap to the circulation / total supply. Transaction volume (current burn tax) and LUNC price increase will mint new CUST and increase the total supply.

12. How will you control the CUST total supply?

It is not required to create a cap for CUST but if due to unforeseen situation where there are too much coins generated, then we can look at reducing the tax % to limit minting of new coins. Alternative way is to disable the distribution of funds from VCF to mint CUST. i.e. instead of minting new CUST, VCF pool will keep accumulating funds until the mint function is enabled. Reason for accumulating funds in VCF is that it can provide adequate back up to LCF if LUNC price crashes more than 3X from current price. The more CUST is minted, the more funds be distributed to stakers in decentralized way and healthier the chain be. This will encourage more LUNC to be staked in the ecosystem and reduce the circulation supply. It will be a WIN WIN situation for the entire community.

13. Can this proposal be explained in much simpler terms as it seems to be very lengthy?

I do agree this is a very lengthy read but wanted to explain my ideas clearly for a better understanding on the functionalities. I would request you to go through the complete proposal whenever you find time.

Sharing the below screenshot for quick understanding on this proposal.

Image 1 — Flow Diagram

VCF — Act as volatility controller and rebalance the peg value on 1:1 basis during LUNC price variation.

LCF & CUST — Have the same % of funds flowing in the respective pools so that $ value remains 1:1 at the time of allocation.

This proposal will abolish the LUNC burn, instead, 60% of burn tax funds will act as if these funds were burned (will not be available in circulation except for CUST) and create a new AFT backing it.

If the community feels that ORD can be replenished in other ways, then these funds (20% of 0.2% burn tax) can be moved to VCF in AFT pool to increase the holdings and act during volatility.

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First of all, thanks for well organized proposal.
I got your point, the terra value came mostly from its stable coin. We definitely need one stable coin. Also support your idea keeping community funds in BTC, (I dont agree with ETH nor BNB reserves).
However all being said: If we abonden USTC, start new one would play negatively because there will be no trust from outside to another Terra stable coin.
But restoring the old one would be significant positive marketing i suppose

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Men, your proposal is good. But as you said. The Ustc is a problem. But what solution do you have.

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Thanks buddy.

Reserve Funds - Yes, we can look at multi-asset collection. We can always come to a consensus on the assets that we need to have. Besides BTC, we should have 1 or 2 more assets as reserves. It can be anything that we can all commonly agree open. I am open to this.

USTC Challenges - I definitely understand that many USTC holders got impacted (including myself) due to the de-peg. Post crash and after the LUNA airdrops most of them would have shifted to LUNC is my strong hunch. My sense is that anyone who hold USTC prior to crash may not be holding USTC now (except for TFL). Majority of the current USTC holders (excluding whales) would have bought at lows and they would still remain in profits or at-least at breakeven point. Moreover all the USTC holders would have staked LUNC as well. If this prop goes thro’ everyone who have staked LUNC will get the CUST rewards for staking LUNC.

Besides that Zaradar, duncan (as far as i know) are working on the possibilities of USTC repeg. All I am saying is that there are far more risks in repegging USTC than a new AFT. If the community is convinced, we can also approach the grants program started by EDK for allocation certain amount of LUNC to the USTC holders. But these are ideas out of thin air and needs to pass governance in first place.

Thanks Navruzbek & Fidel01. The more questions from community is pushing my limits. 30 mts back i was dumb on what to do for compensating USTC holders. Now i have a good idea for compensating USTC holders.

20% ORD Funds - We can utilize this fund to compensate USTC holders. Post the compensation, these funds can be redirected to ORD / VCF based on the plan for replenishing ORD.

Once Alex Foreshah shared a list / idea about blacklisting USTC holders address (like TFL and some other funds). Excluding those blacklisted wallets, we can provide compensation in LUNC equivalent to the USTC holdings of all the whitelisted holders. Either we can give an option to burn USTC and get this LUNC or they can retain USTC and get LUNC. This can be decided based on the technical feasibility for limited support. Hope this will address the USTC holders concern. I will update the prop about this in 30 mts. It allows me to reply / edit only after 30 mts of previous response :grinning:.

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Compensation for USTC holders

Update: “Based on the concern from USTC holders, creating a provision for compensating USTC holders. After blacklisting top wallet holders like TFL and other wallet based on Alex Foreshah’s suggestion (which he proposed when he mentioned about USTN proposal), we can allocate LUNC (that is to be sent to ORD) for equivalent value of their USTC holdings. Once the compensation is done for all whitelisted address, we can route this funds to replenish ORD / VCF based on alternative idea to fill ORD as appropriate. Either burning USTC to obtain equivalent LUNC or distributing equivalent LUNC and allowing them to hold both is something that can be decided later based on technical feasibility for short term”.

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I am most against the creation of any other stablecoins.

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I agree that many would have lost hope after what happened. But it doesn’t mean that we shouldn’t improvise. This model is created such that AFT is adequately backed up on 1:1 basis. i.e. for every CUST mint there will be 1$ equivalent LUNC stored as backup.

When Mt Gox, hack happened, people learnt to use hard wallets like ledger, trezor…After FTX incident, people will start using DEX and so on. It doesn’t mean crypto has come to an end. The most important thing is improvising. I have worked out the model with adequate backup against the ones where we used to mint out of thin air. So rather than losing hope, see that if there are any conceptual flaws that can be corrected. Appreciate any possibility for correction to the prop.

People will move to where they feel their assets are most secure. No to any defi or blockchain

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As you rightly said, people will move assets where they are secured. And this is what I am trying to create with CUST. Decentralised and secured. No one single person or a group holds ownership. It is the distributed to the entire community

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Good direction, the whole problem disappears along with UST - USDT and other combinations and financial pramid that I have already located to a large extent. There is like everywhere else is in our community is some group, that thinks they are very clever and think they are going to make ice cream. This proposal shows that they will get pensions from us and kisses goodbye;)
CUST = 9 in Numerology. I will support !
The only thing I ask for confirmation of the calculations by an independent team of experts. I can show but there are others with more experience. Beloved, don’t miss IT !~!~!

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While independent experts work out and share their views, it would also help if you can also show your calculations. It will add value even if there are flaws in the plan, if anty which can be corrected

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The problem is the trust that people will have in that token. And on this blockchain.

You don’t need to buy CUST for real money until you are satisfied with the safety measures. All you have to do is stake LUNC and CUST is free money distribution as rewards for LUNC staking. Use them to sell in DEX and convert to whichever coin you like to have. Those who believe in this prop will always be there to buy it out. Once you / everyone has trust you can use the swap mechanism and use decentralised money within the ecosystem. How does that sound?

After spending considerable amount and time on this matter, I have arrived at a conclusion of burning USTC. i.e. any USTC holder who prefer compensation for upcoming new AFTs will have to let of their USTC and all their coins are burnt. This decision is made on the following reasons.

  1. Equivalent amount of LUNC will be distributed in exchange for their USTC (whitelisted wallets only), which by itself is a fair compensation. i.e. if anyone holds 1000 USTC and at current price it is approx. $20. So all we will do is send them ~126K LUNC which is equivalent to $20 at current market price. As this is a like to like compensation for USTC holdings, it is not required to be retained and burning USTC makes sense.

  2. Burning these coins will reduce USTC supply relieve from bad debts to a small extent. This is based on the fact that all whitelisted wallet holders hold small amount of USTC and TFL (blacklisted) is not considered here. This will release some pressure out of Zaradar who will be working on repegging USTC. If those who received adequate compensation, it is less headache for Zaradar too and he gets a possibility to make the repeg attempt quicker.

  3. As the USTC holders are already compensated with this proposal, there is no separate compensation required for USTC holders when Alex Foreshah implements his AFT on USTN. This will pave way for him to focus the funds elsewhere as the USTC holders are already compensated.

Considering all these 3 points, I concluded to burn the USTC once they are compensated with LUNC.

How does the compensation work?

  1. We need to create a contract, where USTC holders connect their Terra Wallet to register the funds they hold in USTC for compensation. This should be approximately open for a week to the community members for them to decide whether they want to apply for compensation or prefer to stay with USTC.

  2. If they decide to get compensation in LUNC, they have to register their details in the contract after connecting the Terra wallet. This is to avoid incorrect value and only their holdings in Terra Station can be allowed for compensation.

  3. After the cut off period, LUNC will be distributed to contract (based on the 20% volume which was supposed to go to ORD). Once we have the required amount of LUNC, USTC holders can get LUNC as compensation (i.e. USTC will be burnt by contract and LUNC will be distributed to USTC holders)

  1. USTC refund value will be static value based on the previous day closure. If there was a pump and extreme selloffs from the date of announcement to the compensation date, there will be a calculation based on mean / median / mode for the period (from announcement date till compensation date) and a fair value will be fixed. This will allow the USTC holders not to suffer incase if the price plummets to a low.

Ok, I’m working on this

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The new way requires not only trust but the basis for success, will be Our belief and work for an idea.

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This will be strongest anti-pr for 1.0 (any new “stables”).

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Why should we make this new coin so much in volume? Why can’t we keep it a small number, peg it into luna classic and only allow buy and no selling.

This will help burn lunc to a number we would like and a threshold should be placed until a certain amount then depeg from lunc and let people but/sell this new token according to how they see it.

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