[Proposal] A financially viable LUNC proposal

Governance & Proposals
1

Summary

A community driven Luna Classic revival plan by combining existing user base with new strategic partners to help recover losses by extracting value from the platform.
We create a virtuous circle by focusing on generating value rather than destroying it.

In this document we explore the following ideas:

  1. Turn Luna Classic into a L1 blockchain with LUNC as its token

  2. Buy back and burn the excess supply with cash + options to lower the cost

  3. Convert UST into LUNC using the same options

  4. Attract option market makers and arbitrageurs to revive the DEFi platform

  5. A fund raising idea for the bail out

This is a unique opportunity to show that DAOs are not a meme and that they do work since anyone can step forward and make proposals to revive the network when/if it collapses or simply to make it better.

By committing to secure the network and to honor the outstanding debt (at least partially), we aim to keep the existing user base allowing builders to rejoin and generate value again.
A share of the revenue will be redistributed to LUNC tokens as a yield or a burn.

We make the following assumptions:

  1. UST Outstanding debt: 10B$

  2. LUNC Supply before depeg: 1B Tokens

  3. LUNC Supply after depeg: 6.5T Tokens

  4. At least 70% of the supply is very concentrated, between 10 holders or less

  5. “We” means the community

Motivation

The AAA rated UST token

Many people got lured into investing in UST because they considered a stable algo coin equivalent to a risk free asset and/or for its very generous 20% APY.

The exact same thing led us to the GFC and the collapse of Lehman brothers in 2008: Investment Banks were selling AAA rated CDOs with high yields which investors believed to be risk free assets because of the rating. Sadly collateralized debt obligations turned out to be not so collateralized and so did UST.

But the analogy stops here: As much as the collapse of LUNA/UST has been a disaster for the stakeholders, it is important to highlight that the network and the underlying technology have reacted perfectly well and as expected. In fact these events have demonstrated the extreme resilience and robustness of the LUNC network and the ecosystem it belongs to.

It has shown for example that blockchain is the technology of choice when it comes to handling defaults and collapse of financial markets (which sadly do tend to happen from time to time).

The LUNC recovery rate

Is there actually any value left in the LUNC network ?

Or rather, how much do you value a digital platform which is open source, where anyone can participate and contribute, which has proven it can handle a ridiculously high throughput at a low cost and which is part of a rich ecosystem with many functionalities readily available ?

Furthermore, how much do you value it if we add on top a vibrant community, an existing user base and all the visibility it has recently gained ?

Back to the GFC analogy, not all investment bank divisions were bad: Some Lehman Brothers’ creditors ended up receiving more than they were owed.

Here we believe it could be similar, and plus this is crypto so anyone from the community can contribute to the revival; they can contribute financially, by building apps, by securing the network, or simply by holding/delegating tokens and believing in the project. And anyone who contributes will get a share of the network’s revenue.

So we need to generate revenue, and for that, we will rely on the community and mass adoption to grow it further. The idea is to develop a well-diversified range of products with strategic partners and to use an easy to use wallet to distribute them to end users in exchange for a share of the generated revenues.

The way the network’s revival has been structured is designed to start bootstrapping some activity/revenue by the time we see builders joining in.

Proposal

The network’s bail out

First things first we need to restore the network’s safety. The supply is currently too concentrated, and we need to get rid of the excess by buying it back and burning it.

To do so we will make a public OTC deal with the LUNC whales (aka. the Tera whales) whereby we will commit to buy all the excess supply, around 6.499T tokens at a fixed price of 0.00002$.

We don’t need to raise funds; we will simply provide the infrastructure for the deal to happen and allow anyone to participate if they wish to do so (individuals, VCs, strategic partners or even Tera whales themselves).

What’s at stake for people funding the deal? Well, they can simply buy themselves a nice stake of LUNC tokens and they will naturally benefit from the success of the platform: It is a virtuous circle.

And why should whales accept such a deal? Well, they currently own trillions of worthless tokens. And they will remain worthless as long as they remain tera whales.

By striking the deal they will cash in 130M$ upfront plus 200M LUNC perpetual American call options strike 30$ for future upside. That doesn’t sound like a bad deal.

What if we get front run? People have no interest to buy above the strike price, and it will be meaningless to buy small amounts. We’re talking trillions of excess tokens to clear. The market will regulate itself.

We will set up a smart contract with a ramp up period, say 1 month.
During this period anyone can lock their USDCs (for investors) or LUNCs (for whales) in the smart contract and the transaction kicks off once the threshold is reached or cancels after the ramp up period and funds are be returned.

The deal starts by sending 9.498T LUNC to the Digital Quantitative Easing program for burning plus 400M LUNC to be used as collateral against options.
600M are sent to treasury for redistribution, see new supply section.

When done, it will introduce a new approach to funding crypto projects and set precedent for bailing out valuable ones which failed.

The UST Bad Bank

We must stop issuing new UST tokens and clear the current debt (refund UST holders). Once done UST will cease to exist.

It is important to make things right by the community to rebuild trust and confidence and to show that we’re willing to act in its best interest.

We currently have an outstanding debt of 10B$ (1UST = 1USD).
We commit to redeem all of it at 60% of its face value using LUNC tokens equivalent USD amount when LUNC price reaches 30$, so a market cap of 60B$.

In fact, UST holders will even have the option of recovering 100% of their losses if they hold onto their LUNC tokens and the price reaches 50$ or a total market cap of 100B$.
Above this price, they’re turning a 100% loss into a profit. That’s a strong incentive to use the platform and make some noise about it.

Technically this means each UST holder will be able to exchange 1 UST against an American perpetual call option with strike 30$ and notional 0.6 LUNC.
So 10B UST for 200M LUNC call options in total.

The nice thing about this plan is that we don’t need to distinguish between holders, UST Vs LUNC, Pre Vs Post attack etc. Indeed, people who sold their UST tokens under 0.6$ can buy them back and participate. As well as LUNC holders and speculators: We let the market regulate itself.
And for those (UST or LUNC) who lost everything and can’t buy back, the community can set up a solidarity fund.

The Digital Quantitative Easing program

The DQE program is what will connect the dots between the bad bank, the bail out investors and the whales.

It is a way to revive the network safely and to encourage trading activity by allowing DEFi platforms and arbitrageurs to rejoin the network.

It is a smart contract with the following responsibilities:

  1. Commit to buy and burn 10B of UST against 200M LUNC perpetual American call options strike 30$

  2. Commit to buy and burn 6.498T LUNC against 200M LUNC perpetual American call options strike 30$

  3. Commit to exercise each option it has issued in the money against 1 LUNC

  4. UST holders will be able to claim their options at anytime

The DQE smart contract will be triggered by the bailout one. It will rely on a price fed by oracles to decide whether or not to exercise the options.
Condition 4 simply exists because after taking such a huge loss, some people may have decided to take some time off markets and it would not be fair to exclude them if/when they return.

Some points to be considered:

  1. The oracle price should be based on an average price from different sources to be more robust

  2. DQE is an independent entity not controlled by anyone with the sole responsibility of buying back tokens (UST and whales’ LUNC) and issuing and exercising options

  3. We might use asian options instead in order to prevent people from pumping the price only to get their options exercised

  4. We might add an expiry date (5Y or 10Y) to make options less computationally intensive to price (for market makers)

  5. The DQE will be fully collateralized at any time and hence won’t stake its LUNC tokens, neither with validators nor any DEFi protocol. This must be enforced in the smart contract

  6. The contract might need tokens to pay for its execution and potential security audits in the future (aside of the initial one)

  7. These are physical delivery options

With this program, DEFi platforms are encouraged to join the network since people will be seeking to sell some or all of their options earlier and market makers will be able to provide liquidity for them.
This will generate transaction fees for the network and will allow for a new economy to start taking roots.

The new supply

We will burn 6.948T tokens and redistribute 1B tokens so the existing holders will be diluted 2x which isn’t bad given the recent events.

400M will be used by the DQE.

Here is a proposal for the distribution of the remaining 600M LUNC tokens:

  • 100M airdrop to existing LUNC holders

  • 500M Community pool unlocked by validators, broken down as below:

  • 200M to fund builders (developers & validators)

  • 200M to strategic partners

  • 100M Treasury

The airdrop to LUNC holders remains to be determined. It feels like it should go to the smallest wallets or distributed by wallet count rather than pro rata to the holding size. We could also split it in two and use a half to seed a solidarity fund. These are only suggestions.

A funding idea - Bringing a key NFT player to the network

Yuga labs, currently valued at 4B$ , is looking to migrate to a new blockchain after the issues they encountered with the launch of their token:

https://en.ethereumworldnews.com/yuga-labs-apecoin-dao-considering-offers-to-migrate-ape-off-ethereum-onto-avalanche-flow/

The idea is to have our community make some noise to attract them to LUNC network.
In exchange they would get a solid infrastructure to grow with a proven track record of handling high loads. They would also gain access to a vibrant community and a pool of talented developers.

Again no private deal here, they can join the public OTC deal and commit a share of their revenue to further develop the ecosystem.

30 Likes
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great idea

3

nice idea

4

Bu teklif eger topluluk olarak bir haraketlilik saglayabilirsek saldiri oncesindeki duruma tekrar gelebiliriz.

5

A good idea. It is worth making suggestions, maybe people will vote

6

@Deathstar_Daddy have you seen this proposal?

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Great

8

Why such complex schemes? Make a permanent tax on any transactions with a token in the amount of 0.1% to 1% for burning tokens. And in a year the price of the token will rise to 0.1 dollars. And after 18 months the price will become about 1 dollar. After 2 years, the price will increase to $10. After 3 years, the token will cost $100. This tax is the simplest and most effective solution.

18 Likes
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This is a ridiculously well-worded proposal. But like @pivo4et has said, a simple tax and burn scheme would do the job. I think the viability of your plan lies in the fact you’d probably try and accelerate the dollar valuation timeframe. But it wouldn’t be easier to implement.

4 Likes
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Burning mechanism to #Lunc ( old Luna) go and vote

2 Likes
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I’ve spent the past week trying to think of ways to revive Luna Classic and on merit, this absolutely far exceeds anything many of us could formulate. A huge well done!

Two areas I think this proposal will face challenges:

  • Although the idea of redistributing 100M tokens, in ratio of wallet balance at snapshot, is a logical and efficient solution, this will take a tremendous amount of socialization for people to understand that they’re not being robbed, but instead rather receiving an equivalent amount of a reduced total supply of tokens. (solution: we’d need to ensure all the official and unofficial communication platforms under the control of the Luna Classic community be used excessively before such an event takes place).

  • Allocating twice as many tokens to “strategic partners” as what’s being allocated to actual holders isn’t palatable in any way or form. Holders should be regarded as the primary beneficiaries of any proposal. Similarly, the proposed allocation of 500M (83% of all new tokens) as a community pool is disproportionate. People thought Proposal 1623 (which was passed) was a money grab for the community pool and that was only 30% of the distribution.

Other than that, I really like the revival plan for Luna Classic!

3 Likes
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Поддерживаю ,отличная идея!!!

2 Likes
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I agree in general there is a path forward, but I believe this is overly complicated and perhaps better done with simply a burn plan and encouraging developers and validators into a new community.

Also, the 2.0 version has be promoted as a solution for larger holders both in UST and LUNA, so your proposal seeks to doubly compensate some but not others.

These are now 2 distinct and separate projects based on the voted on Fork, so in my opinion it has to remain as such. UST should not be linked to LUNC going forward since the leadership chose the Fork as their solution.

But many like LUNC and would like to see it live in the future. Renewed and rejuvenated with new blood and new governance.

Finally, with a burn plan the overhanging supply can be dealt with and whales have as much right to buy as anyone so there is no need to create a bifurcated program. The upward price movement with ultimately determine the supply that is burned. The higher price the more volume and more burn.

2 Likes
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Thanks for tagging me see my feedback below.

This is imo a deal breaker. In the community. Many understand USTC is broken and needs to change, most will disagree with scrapping it entirely, most of all the current USTC holders.

USTC not only adds value to LUNC, but is a mechanism in which LUNC supply can be controlled in the future. I know USTC is what broke everything, but it was the lack of responsible leadership that allowed that to happen not USTC solely. USTC can function well and with the proper safeguards in place this can be prevented from ever happening again.

I’m confused how this will work? If I understand this correctly I, your asking the whales to give up their holdings in exchange for the right to buy it back later at $30. I can see in theory the benifits, but in reality I do not see any insentive to agree to this. Also I do not believe in any recovery scenario LUNC will have a market cap of $30 Billion anytime soon. Maybe $10 - $15 Billion WITH USTC.

If you are proposing this, why go through the above half at all. This is the better of the 2 options, though it will severly limit the value of our investments.

In fact were actually getting less of an allocation in this coin then we got in new LUNA coin???

What this effectively does is ensure that current holders will not recover. Even if LUNC’s market cap goes up 15 times its current value to $11.25 Billion (which likleywill be very challenging), we will just break even as we end up with only 7.5% of the float. In fact it’s more likley we loose even more money here given it’s challenge to reach the marketcap necessary.

Your math is off as well. This adds up to 1.5 Billion. Also dillution is 15x not 2x as current hilders get only 7.5% of the airdrop.

Now the only thing your plan touches on is reducing current supply by dilution to existing holders. No plan to fix the chain, build it up, deal with validators, and future use. Without this the Call options would not happen, and no one will agree to being dilluted.

Imo it is an overly complex plan to burn/reduce existing supply. It doesn’t need to be.

5 Likes
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***** Update on above post as I cannot edit due to slow mode. Ridiculous rule imo

If you are proposing this, why go through the above half at all. This is the better of the 2 options, though it will severly limit the value of our investments.

In fact were actually getting the same allocation in this coin that we got in new LUNA coin???

What this effectively does is ensure that current holders will not recover. Even if LUNC’s market cap goes up 10 times its current value to $7.5 Billion, we will just break even as we end up with only 10% of the float. In fact it’s more likley we loose even more money here given it’s challenge to reach the marketcap necessary in the short term

Now the only thing your plan touches on is reducing current supply by dilution to existing holders. No plan to fix the chain, build it up, deal with validators, and future use. Without this the Call options would not happen, and no one will agree to being dilluted.

Imo it is an overly complex plan to burn/reduce existing supply. It doesn’t need to be.

******* Edited after re reading math works to 1 Billion new coins. Had to wait 30 minutes to edit a post is annoying and stifles legitamate conversation

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  1. After the buy back and burn we go back to a 2B supply of LUNC tokens only - no more USTs

  2. We need to buy tokens back and burn them before doing anything else otherwise the network is not safe to use: PoS risk with cheap tokens

  3. Without the buy back, Luna Classic will simply be a pump and d_mp token as no builder will want to join since it will be possible to steal assets from the network. So no DEFi, no pools, no borrow lending, no NFTs etc. It is a petty because there are many Apps readily available to use.

  4. After the price reaches 30$ UST holders get 200M LUNC token for a total value of 6B$

  5. After the price reaches 30$ UST whales get 200M LUNC token for a total value of 6B$

  6. Main advantage of using options is that it lowers the cost of the buy back: At current market price it would cost around 650M to buy all the supply. But then as you buy price will increase so really cost of buy back will be more in the Billions USD.
    With options, we’re buying back at 6B$ but we only need 130M$ today: Options Wiki

  7. We could simply say UST holders get 200M LUNC tokens unlocking when price hits 30$. But with options they could sell before, if someone is willing to buy the options at 5$ some UST holders might be happy to sell and move on. With locked tokens…you’re locked :sweat_smile:

  8. How we redistribute the new supply (600M tokens) is up to the community

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If there is a burning of tokens, then their price will rise significantly. Perhaps the token will cost $50 or more. This means that by selling tokens at 30 strikes at 1 cent, the option seller will receive a loss of several billion dollars if the token grows to $50. Only an idiot would agree to sell options.

1 Like
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johny
All of your discussion unfortunately is NOT applicable. ALL that was dealt with in the Fork proposal and why there is a LUNA2 trading now. What needs to be focused on is simply saving and resurrecting LUNC, that’s all the conversation. It needs to be decoupled from UST, a burn tax or fee or voluntary via validators to reduce supply.

The more it trades the more is burnt. I think you may be holding on to an idea that is no longer relevant to where we are. Very intelligent, but that time has passed!

And the new community needs the keys to the kingdom to make this happen. Then all will flow with a newly restored LUNC which we all benefit from equally.

2 Likes
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I didn’t understand anything … but very interesting)
And let’s just buy a batch of caps and sell them for the amount of LUNC that you have left … and write for each amount how much the cap cost the owner ))
Each cap will be unique, differing by a number in dollars) You can choose physical or NFT)
It’s easier )))

1 Like
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You’re confusing between option writing and option market making.
Besides you’re not taking into account the fact DQE will exercise options it has issued if they’re in the money.