During uncertainty there is a limit of Fiat the Luna/Terra ecosystem can provide to people that want their Fiat (i.e. USD) back. With the current parametrization too much LUNA is minted, leading to dilution, leading to uncertainty with the system grinding to a halt.
My proposal is to link UST → LUNA minting to the Market Cap of LUNA (i.e tokens x Price of LUNA).
This makes sure that the ecosystem is not overburdened with liquidity demand.
The following example shall clarify the idea:
Tokens: 6,907 B
Price of LUNA: 0.002 USD
Market Cap: 1,3 B USD
If LUNA minting is restricted to 0.72% of Market Cap per day +/- 10M UST can be converted to USD per day. That is an amount the ecosystem maybe can handle. The parameter is of course up to discussion. This way the 11bn UST outstanding could be converted to USD within 3 years.
If confidence in LUNA falls, so will the price, so will the Market Cap, leading to less UST that can be converted per day. With a Market Cap of say 100M USD 700.000 UST can be converted per day and so on.
This tweak makes sure that the ecosystem can handle liquidity demand. This way every UST holder WILL get his USD back, but with uncertain timing. UST would then become a soft peg to the USD.