[Proposal] A financially viable LUNC proposal

[johny]

Ok, from the feedbacks I’ve received so far, it feels there is some good basis to move forward but the current proposal may have to be rephrased in order to get some more support and engagement from validators, devs and DK.
Please see below how it would look like:

First we need to secure the LUNC network and restore governance so here is the new deal

1. We offer to buy back 6.499T LUNC tokens from the whales at 0.00001$ + 100M LUNA European call options 2Y strike 20$ (simpler and very realistic)

2. So we need 65M$ cash + 100M LUNA from the LUNA community pool

3. Overall, whales gets an average price of 0.0003$ per token for selling 6.499T LUNC, thats attractive

4. DK / Terra Money to raise the 65M$ or use LFG funds (if any) and lobby publicly and with Binance/FTX/KUCOIN to help broker the deal

5. There aren’t that many whales…

Then Terra Money together with the community and builders fix USTC and allow it to repeg

1. Here are some suggestions:

@aeuser999

At this point I am looking for a proposal that would fix the minimum necessary underlying problems (and then after those are solved to move to consider broader changes). I realize your plan would buy back UST, and then turn it off (which I agree would handle the issues in the protocol surround UST - although I am not sure how many residual problems that may open for dapps).

• I would see the underlying problems with the current protocol as:
  • the mint/burn mechanism:
    • to adjust from hard limits on burn, around the mechanism used to control the peg of UST using the LUNA as working reserve, which caused the run to instead be based upon market pressure limits - something akin to:
      • always make sure mint-buy-on-market-and-sell are done in one step (even if there are many asynch processes),
      • market maker that has to not only add value to the book on the chain but must always contribute to the pegging - particularly when there is large market pressure,
    • to keep buying open in market pressure situations for the blockchain (using the same market maker + must contribute to peg mechanism as above),
  • the reserve (to have it expand beyond the working reserve of LUNA to include a non-working reserve that backs the stablecoin at least 100%, and the two reserve sets back it at least at 110% - 150%). This moves it toward providing catastrophic protections.

2. We vote to decide if we burn some community wallets eg. LFG, core if it helps with the repeg

3. This allows the network to get back to a functional state and builders to relaunch their dapps to capture back some or all of the 100M LUNA spent for the buy back and burn

Finally, LUNC becomes a pre prod / experimental / lower scale fully functional network to support LUNA

1. There must be a cap on the total amount of money in LUNC so it is safe to use and it doesnt replace LUNA but rather complements it

2. Builders can experiment safely new ideas in a prod network with real incentives (real money). In particular FIAT to Crypto ideas such as new stable concepts etc.

3. We invite Institutionals / regulators / retails to participate safely and experiment with digital money before moving on to the large scale LUNA network

4. Stakeholders in LUNA will want to participate to the network to strengthen and battle proof their apps in LUNA

5. LUNC becomes a sort of launch pad / buffer / prod testnet for apps in LUNA

6. It will come under real life pressure / attacks (as opposed to a testnet) but in a controlled way because of the low scale and will allow to learn when things go wrong to make full scale LUNA apps more robust and resilient

7. Builders spend 30% of the LUNA community pool to get a fully functional pre prod env with real incentives and stakeholders

8. LUNC / USTC stakeholders can recover some or all of their losses, confidence is restored in the Terra ecosystem and community will be united again ==> Community happy, Validators happy, Devs happy, Mods happy, DK happy everyone happy

@aeuser999 @Atoj @moonplatoon @AtoZ and others please help circulating this amongst builders, validators and the community in general if you think it makes sense