Now UST and LUNA are faced with a dilemma. To save UST, it is necessary to reduce the supply of UST, which means to increase a large amount of additional LUNA supply by burning UST, which may lead to LUNA zero. If LUNA price drops rapidly and market value drops, people’s confidence in UST will be reduced.
If you choose to save LUNA, it means to give up UST, and LUNA also loses the meaning of existence. LUNA, on the other hand, has been heavily reissued and is unlikely to return to its original price.
In this case, the chances of saving UST and LUNA are slim. But Do Kwon hasn’t given up, and the community has come up with their own ideas for saving UST/LUNA.
For example, Larry Cermak, vice president of research at The Block, sees unlimited bad debt in The current program for UST holders to withdraw liquidity from LUNA, and LUNA’s decline will dry up liquidity. Give up UST for the time being, switch to USDT/USDC, focus on Layer1 ecology, and repay UST bad debts later. There is already a lot of eco-building going on on Terra, and LUNA as a native token for the common chain is one option, but Cermak admits that the chances of success are probably close to zero.
Founder Do Kwon’s current plan is also biased towards UST. Terra’s development is inseparable from the offline use of algorithmic staboin by Korean people, and Terra also bills itself as an algorithmic staboin project. I also agree that UST is more significant than LUNA. Refer to stablecoin projects such as Maker DAO, etc. When the agreement becomes insolvent, additional governance tokens are also needed to maintain the stablecoin value. Here are some personal ideas for maintaining UST.
Further encourage users to destroy UST and issue LUNA. As the circulation of UST is still high, it is too difficult to recover. Therefore, it is necessary to reduce the circulation of UST and reduce the debt scale. It can reduce the exchange cost from UST to LUNA, increase the exchange cost from LUNA to UST, and avoid the arbitrage activities from LUNA to UST.
Given a certain period of time to continue to allow users to exit at a discount. In fact, after the UST explosion, because of the price and various expenses of the prophet, destroying 1 UST will not get 1 DOLLAR LUNA. Continue this process by letting users exit at a discount, saving bullets and leaving users who believe in the agreement.
To reformulate the financing strategy, consider making a proposal in exchange for a portion of Terra’s agreed revenue distribution rights in exchange for financial support. According to Larry Cermak, Terra’s Layer1 is also valuable. The failure of the previous financing may be due to the institution’s inability to determine how the price and quantity of LUNA will change. The more additional LUNA issued, the lower the value, and the conversion of equity to income distribution is equivalent to locking in a percentage of Terra’s equity, reducing the risk of institutional participation.
With financial support and limited debt scale, users can exchange part of the value at a discount. For example, users can exchange 1 UST for 0.6 US dollars, and then increase the exchange ratio. This practice is also practiced in the Fei Protocol.
With good news, buy LUNA, and make LUNA’s market value close to UST again.
Taken together, there is a low probability that all programs can save UST and LUNA, and the disjunction between UST and LUNA will also affect investor confidence. Even if the UST returns to $1, Terra’s design needs to be changed as soon as possible, such as increasing reserves and limiting the size of UST.
The failure of UST does not mean the failure of the crypto market and the failure of the algorithm staboin. Any innovation has to have a price before it matures and hits the ground, although the price is too painful. UST today is undoubtedly a wake-up call to all crypto entrepreneurs. While innovating, remember to respect risks, considering extreme environments and black swans, because you never know what will come next second
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