Inflation is a common problem that erodes the confidence and development of any market in the world. Below, I suggest a self-regulating mechanism to combat hyperinflation, at least to stakeholders (the real supporters of the system), which can restore credibility to our ecosystem.
In my opinion, the only problem with the algorithm was hyperinflation to stakeholders, which uncontrolledly dumped excess Luna onto the market, causing a system-wide spiral of disbelief.
After re-establishing the values for those who are entitled before the depeg (hardfork?), I suggest implementing a variable staking rate exponentially linked to inflation, to at least maintain parity with the current value without lost money when you are in staking. I could be wrong, but the only reason why the stakeholders (of Luna and UST) lost money was because the staking didn’t keep up with the inflation generated after the depeg.
In the same way that there is a period of 21 days to recover funds invested in staking, a period must be implemented so that new amounts allocated to staking can return rewards, preventing opportunists from getting staking after acquiring Luna cheaply on the market. So, even if the algorithm dumps Luna on the market, the project’s legitimate supporters (those who were already staking) will be protected from inflation, and often even profiting from it (by exponentially adjusting the staking rate), increasing the community’s trust in the token and avoiding a new spiral of distrust.
There is only one tool against inflation, interest! Only with high interest rates (read high staking reward) will the investor feel confident in keeping his position in Luna (or UST in Anchor protocol), even if there is some disturbance in some of Terra’s stablecoins. Whoever holds Luna/UST in moments of market turmoil will safe or be even richer.
About the hardfork, the new Luna needs to be strong and resilient, it needs to be a store of value for stablecoin trading, and this will only be achieved if people trust that holding the new Luna will not lose money, and for that, the new Luna has to appreciate in value, moments of market excitement (when interest in stablecoins grows), and during moments of inflation. With this model, the new Luna will not be interesting for trading, as whoever acquires them will be interested in staking to protect themselves from inflation.
In short: this proposal to reward those who decide to keep their money in staking during a crisis makes the system stronger, as it makes it more profitable and works like a magnet attracting more money when someone makes a large withdrawal trying to destabilize the system.
God bless us.