Background
Per recent community proposal and quoted by @dokwon himself the current new luna token distribution is as of follows:
- 400M (40%) to UST holders pro-rata at the time of the new network upgrade. UST holders need to be made whole as much as possible
- 100M (10%) to Luna holders at the final moment of the chain halt – last minute marginal luna buyers should be compensated for their role in attempting to provide stability for the network
The Problem
There are currently a lot of noise and posts about how this token distribution shoud work with people putting forward suggestions to ‘burn’ and ‘not to fork’.
While i can see not forking can allow a more graceful and less friction restart the terra ecosystem, but the existing token holders are being diluted heavily by the newly minted tokens, as a mathematical fact the new luna holder’s share of the terra ecosystem has been acquired with much less capital than the existing luna token holders before the depegging event.
The proposal
I believe we cannot simply use a 4:1 proportion for the new token distribution, instead each individual’s share of the entire protocol should be considered. An even ground can then be reached i.e. the same weight of 50:50 should be distributed between old and new luna token holders after offsetting their share.
This way the old token hodlers are compensated and giving a chance to restart in the new chain, the new retails which just recently entered the market can also get an equal 50:50 distribution that is fair to their equivalent pruchase power. We should aim to retain these new token buyers who holds interest towards the terra ecosystem and welcome them into the ecosystem.
To calculate the total supply at a given time should be a simple task:
- First step is to figure out the quadratic equation of the luna token supply increase after the depeg event.
- Second step is create the following functions calculateTokenHolderShare(address, blockheight) and calculateTokenHolderShare(lunaTokenAmount, timeInstant) for both on-chain and off-chain calculations.
Example can be shown below:
Thoughts on UST
In reality UST here is the bad debt, in the new luna chain or protocol we can allocate 10% of the DAO/Protocol earnings to slowly pay back the debt. This is something Hundred Finance does, the downside is of course this some what holds down the new ecosystem growth by some percentage, however it is a lot feasible to ‘delay’ the debt with a promise, note this will need some more thoughts.