We begin by reactivating the market module to restart the seigniorage, but we impose the peg of ustc at the current market price (0.05$, for example). This process will begin minting new lunc if the value of ustc is less than 0.05$ and burning lunc if the price of ustc is greater than 0.05$. ( This is how algorithmic stablecoin works)
If we re-enable the market module by leaving the value of ustc pegged to 1$ we’ll trigger a massive lunc minting process that will end up in massive lunc sell off. We absolutely don’t want this!
Therefore, we need to gradually increase the value at which the oracle enforce the peg in order to avoid the enormous minting procedure.
For instance, the Oracle will impose the USTC value at 0.05 USD on Day 1 once we enable the new market module. After 10 days, however, it will increase the threshold by 0.01 USD, making the new peg 0.06 USD. Therefore, as time passes, the market module will continue to increase the peg’s value until we reach the 1USTC=1USD level.
People will start purchasing USTC in the mistaken belief that it will return to the peg right away, but this is untrue. In fact, since ustc is over the original 0.05$ peg, this will enable us to start burning some lunc.
Additionally, the soft-peg previously described will unavoidably result in the minting of new lunc, therefore if we don’t want increase the lunc supply again, we need to generate a new token with a very limited supply or choose to use directly the new Luna token.
Finally, we can also put in place a new bank-run mechanism that can identify excessive sell pressure on USTC and impose a new lower peg, say 0.90$, dissuading traders from selling out.