[Proposal] Algorithmic solution: fair and almost full compensation for everyone


Decentralized stablecoin is the unique selling proposition of the old Terra. UST, low fees and high Anchor yields brought a lot of people here (including me).

In my opinion, new Terra will face hard times if:
— not restore users trust and confidence,
— not retain an army of loyal users,
— lose the main feature — decentralized stablecoin.


  1. Create a new UST — an over-collateralized decentralized stablecoin.

  2. Create a dUST token — de-pegged UST. dUST initial value will be well below UST, but the value will increase over time (similar to aUST) until it equals UST.

  3. Each user receives compensation in dUST according to the snapshot at the time of the new network launch:

    • UST/aUST holders receive dUST in a one-to-one ratio.
    • Luna/bLuna holders receive dUST according to Luna’s price at the time of appearance (transaction) on the terra-address. If you bought Luna at a high price and kept it in your wallet, then you will receive appropriate compensation. If you transferred Luna from CEX today, you will receive compensation at the current price.
  4. When compensation is paid, old UST and Luna become obsolete (may be liquidated or burned).

  5. Create a new protocol to work with dUST (Anchor modification).

dUST protocol carries out 3 tasks

  1. Accumulate UST income in Protocol Pool from different sources:

    • reserves of the Luna Foundation Guard (initial source),
    • additional fee for each transaction on Terra,
    • interest generated from UST borrowers and collateral staking (Anchor principle).
  2. Provide up-to-date info about:

    • dUST circulating supply,
    • Protocol Pool earnings and savings,
    • dUST/UST exchange rate.
  3. Allow dUST holders to burn dUST and get UST at the current price.

Additional info about dUST price (dUST/UST exchange rate):

  • dUST price is determined by the ratio of [Protocol Pool] to [dUST circulating supply].
  • dUST price is driven up by Protocol Pool income.
  • dUST price increases over time until it equals UST.
  • Burning dUST does not affect the price, but accelerates the growth (recovery) of the dUST price in the future.


dUST circulating supply: 1500 dUST
Protocol Pool: 18 UST (new over-collateralized stablecoin)
dUST Price: 1 dUST = 18 / 1500 = 0.012 UST
UST left to restore the peg: 1482 UST

John burned 3 dUST for 0.036 UST

dUST circulating supply: 1497 dUST
Protocol Pool: 17.964 UST
dUST Price: 1 dUST = 17.964 / 1497 = 0.012 UST (unchanged)
UST left to restore the peg: 1479.036 UST

+2 UST in Protocol Pool

dUST circulating supply: 1497 dUST (unchanged)
Protocol Pool: 19.964 UST
dUST Price: 1 dUST = 19.964 / 1497 = 0.013336 UST
UST left to restore the peg: 1477.036 UST


The refund process will take years, but people will have a clear plan and hope to regain their funds.

Everyone will always have a choice:

  • get some UST instantly by selling or burning dUST tokens at a discount or
  • wait for higher dUST price and higher returns.

Looks like an interesting concept. I’d definitely like this looked into when we build a final solution for Luna-classic.

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