We can handle this just like any bankrupt company, without a fork.
UST is bad debt while Luna is an equity. To solve the debt, offer all UST holders a choice.
(1) Sell out UST at loss now…
Or (2) lock up UST into a fixed long term ‘bond’ with a higher recovery, 1y, 2y, whichever duration they choose, possibly paid back by ‘UST 2.0’ which is collateralized and much more stable.
It’s basically “divide and conquer”. Big chunk of UST debt will be broken into smaller pieces which will be handled over time slowly.
Once bad debt is re-structured this way, then it becomes much easier to seek rescue financing.
Because from a TradFi perspective, uncertainty regarding bad debt is reduced and Luna rescue deal becomes more attractive.
So the post restructure payment waterfall will look like this :
- UST cash-out electors (senior on-demand debt)
- UST fixed term ‘bonds’ (senior debt)
- Rescue financiers (junior high interest debt + equity)
- LUNA (equity)
Once bed debt got handled this way, we can borrow more time to make UST 2.0.
I’m borrowing the idea from @wassielawyer (https://twitter.com/wassielawyer)
Original thread is here: https://twitter.com/wassielawyer/status/1524411290873069568