Summary
This is a series of proposed steps so as the Community may take over control of Luna Classic or Luna 1.0 as I prefer to name it. The optimal method of implementation is to break this proposal into a number of sub-proposals and list them for voting now that the non transparent past “leadership” is moving on to Luna 2.0.
Motivation
I have seen the exact same playbook being played out by MyBit C.E.O. a past crypto-project. I had tried at the time to place proposals in place to revive that and in the process I have learnt a lot with regards to the limitations this kind of endeavor entail. With a simple web search anyone may retrieve information on MyBit and see what I mean. Some of the points I am about to lay out here, are already mentioned in other proposals but they may lack clarity on certain aspects, e.g. conditions that trigger specific actions or what the end goal is.
Proposal
Step 1.
Urge Luna 2.0 team to burn their holdings of $UST and perhaps of $Luna 1.0 to the extent they do not actively participate in further development of Luna 1.0. In any other case they will be able to control Governance effectively dividing and ruling the Community. In addition, in case we make it, they may decide to massively sell their holdings causing more turmoil, while pocketing our efforts’ outcome.
Luna Foundation Guard or whoever controls the Treasury right now should use remaining funds to buy back $UST which was dumped to the market at a deep discount. This serve two objectives.
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It establish a precedent that shorting will not deliver profits.
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It maximizes our ability to restore the peg rewarding those who did not panic sell.
As soon as the purchase is concluded burn all $UST in the Treasury effectively reducing the outstanding amount to restore the peg. Careful here, I do not mean to redeem $UST for $Luna. I mean burn it. Step 1 in my opinion, should be approved by a standalone proposal. No other step should be implemented before this one is done. Then allow the $Luna 1.0 monetary supply readjust as soon as the relevant mechanism is triggered.
Step 2.
Step 2a (optional).
If there is no such thing as a Community Treasury, we should establish it and either hard code intervention mechanisms or take the less optimal route of issuing mandates through proposals for specific individuals to perform the necessary actions. This last option reintroduces a central point of failure and control which is not favored at all. We would need to elaborate on this further and perhaps consider alternative options.
Step 2b.
For as long as the the peg is broken, a transaction tax should be introduced to implement a burn process of $Luna 1.0 and replenish the Community Treasury. This type of intervention should be made permanent and be triggered automatically in the future. The condition to trigger it should be a de-peg incident and the condition to deactivate it would be a restored peg. This feature should be approved in three standalone proposals. One to approve the feature implementation in principle, one to approve the actual “tax” rate per transaction and a last one to decide what percentage of each transaction fee is burnt and how much is used to replenish the Community Treasury.
Step 3.
Someone else has also proposed to reduce the number of blocks that a readjustment of the $Luna 1.0 monetary supply happens on chain, to allow for faster responses. It is a proposal that should be thrown to vote in principle and then if approved, a second one to approve the number of blocks the measure is triggered.
Step 4.
Last time I have recently checked it is possible for $Luna 1.0 holders to mint $UST by burning $Luna 1.0 and the reverse as well, redeem $UST for $Luna 1.0, burning the $UST. In both cases the one quantity is burned in order to create the other. Please correct me if I am wrong. So, in this step it would make sense to mint $UST by burning $Luna 1.0. This one would need $Luna 1.0 holders to start issuing $UST again, effectively reducing the total supply of $Luna 1.0, further allowing it to appreciate. Since it is the main collateral, appreciation is in favor of a speedier recovery. This measure may also bode well with those who do not want to burn their tokens a measure that is not endorsed by me at least. However, this decision is private and no proposal is necessary to enact it. Just make sure not to do so before the other measures are implemented, because there is an increased probability it will not make much difference before that. Part of the damage done might be that $UST holders massively redeemed $Luna 1.0 when $UST took the dive. However, I have really not researched this on the blockchain explorer.
Step 5.
Introduce a stop-redemptions mechanism in cases of extreme volatility to prevent such a rapid decline in short time. Meaning developers should introduce another feature that automatically freezes redemptions of $UST for $Luna 1.0. Although it may make sense to reduce $UST in times of volatility, this action further dilutes the monetary supply of $Luna 1.0 reducing its value which is the collateral upon which $UST’s value is derived. It is a controversial action. I suggest a proposal to approve this measure in principle and if approved a second proposal to decide the volatility rate which would trigger the redemptions freeze.
Step 6.
Introduce a feature while minting $UST to issue it at a 50% collateral rate. Meaning for each $ worth of $Luna 1.0 only $0.50 of $UST will be issued. This will further shield the $UST from volatility and shorting while it may may prove that #algopegged “stablecoins” are a viable concept. A last proposal to approve this measure in principle and another to decide the final collateral rate would be necessary.
Bottom line.
What exactly has happened is not clear at the moment. Whether it was an “attack” or an inside job remain to be cleared in the weeks ahead of us.
If it was an attack, then consider it one not just against Terra 1.0 but crypto as a whole. This is because if #algopegged stablecoins mature as a technology then the traditional financial system is automatically rendered obsolete, for ever and ever.
If it was an inside job, then the team which performed it do not subscribe to the vision of a free world and really betrayed us all who do.
What ever the case is, this is a good time to prove we are able to pull this off. In the process we should not just count on our abilities and skills but actually recruit other projects, teams and individuals to lend a hand because this affect their future as well.
