A week in crypto is 2x that of the equities market. I will gladly hold cheap Luna if I can estimate a return to value and hold something that would benefit from the gigaburn like bUST mentioned in the previous reply. I believe we should incentive all investors to help payback the debt through a means that provides mutual benefit. TFL/LFG should not be incorporated into the solution in such a way that makes them a point of centralization.
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As a Lunatic who has lost money in this ( not a VC), I believe the fix should benefit the user agnostic of their relative wealth to the majority of participants. Small Wallets, TFL, LFG, Mercenary capital, or Blackrock should have the same rules apply. There is an opportunity to sell the debt of the project in conditions of insolvency so if this were to happen through another exploit, Luna could rise again. In short, targeted Airdrops and other preferential treatment should be avoided.
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@Amn_Qetu Thanks for your interest, I’m still considering your other posts re centralisation.
But about this: to be specific, Terra’s 11B debt is owed in $UST – not in USD – which is why the cost of regaining solvency are much lower than $11B in USD. The reason it is cheaper is because everyone has decided Terra is finished, everyone has figured out that Terra can’t just mint ($UST) or hard-fork (Terra V2) their way out of this conundrum, so they are capitulating and selling $UST (fair enough). This is causing the debt to be heavily devalued on the open market.
This all means that the total value of their debt is 11B $UST precisely, but nobody knows the exact USD price that would be paid if you tried to buy it all back. As of the time of writing this though UST is $0.08 so I think $0.25 used in my calculations looks pretty generous.
To be fair however, if 11B UST are really to all be bought back by just TFL / LFG, that could reprice $UST above $0.25 and make the recovery costlier than outlined in OP. That is why it should be a fixed % of the total $UST held which is burned regardless of market value. Because the interest payments are to be made during insolvent conditions, note that it’s not a Market swap burn to mint $LUNA, I’m suggesting to destroy UST permanently by sending it to a burn wallet.
Looking at the below equation you can work out the remaining USD owed. This is why I mentioned the importance of an acquisition target price and making the UST markets - if TFL or Terra community apes in too fast we will just increase the USD value of the debt by bidding up UST too early.
(USD value of the debt owed) = (predicted UST remaining to burn for TSR>=100) * (UST/USD oracle rate)
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I totally agree and would make these suggestions:
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Open the debt for sell on the open market, make it profitable to purchase debt.
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Invest in maintaining off-chain liquidity which will be orders of magnitude greater than on chain liquidity
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Lock aUST that is utilized in projects on the chain to avoid TVL concentration in Anchor
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Add formal dashboard that report Terra health and key calculations such as Anchor rate to restore trust and neutralize bot fake news attacks.
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Ensure there are multiple oracles referenced to protect against arb attacks.
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Purchase and buy/back of BTC and other assets for peg maintenance should be coordinated with Astroport.
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One central problem which remains is that without decentralised $LUNA ownership, the chain is centralised, not that dissimilar from BSC in that respect. That is why I outlined that TFL needs to play the central role in the debt repayments; if we have any chance of regaining decentralised ownership without a fork, we must first rally around TFL to prevent attackers from taking majority share and de-facto killing all prospects.
That all being said, bUST as a way to prevent complete centralisation of stake with TFL is a great idea. I’d caution about marketing yield bearing products at the current time when investor confidence is at its worst, perhaps this makes the best sense as a risk asset to be auctioned off when $UST price is not at all that much of a discount.
The $UST gigaburn has to be done for zero return, the market needs acknowledgement from TFL that marketing $UST as a stablecoin with stable yields was a bad direction. It will heavily signal for them to expect stability and security as a priority focus from now on.
Lastly, many of the intricate details of the recovery plan are really not for me to dictate, but for TFL, large stakeholders, and the community to figure out amongst us. So thanks everyone for the input so far and let’s get the rest of the community onboard the sober discussions.
That is my point. Maybe we should allow them to bid up the debt price. If we turn the debt into a commodity it will speed up the recovery time, which is the goal. I would purchase bUST if it were equal to bUST = UST price + recovery fee
The insolvent condition is a state of the system, not a special case before the system is back online. As such natural trader| investor behavior should be used to remedy this state.
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This is a salient plan. The legal implications for what was call the Fatman proposal has many more legal risks then what @wellhat is proposing.
A planned recovery makes much more sense than a restructure where only few are partially compensated.
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I was reading that there is plans to disperse equity to the community. That was the assumption I was theorizing from.
Fair point. The idea would be bUST = UST price + fees . Keep it very transparent and earn trust.
I definitely see your point, for me the answer is probably somewhere in between. If you did attract the capital to deploy a bUST token as you’ve described, there are still risks involved; if $UST were to be bid up to e.g. $0.7 and stabilised instead there, does that make the recovery easier or harder? TFL is almost certain to play a central role in coordinating recovery and debt payments, particularly if it’s a zero return burn. But now that you say it I do think there is an opportunity for dapps to play a role for more veteran users who want to long $UST with yield.
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I like it. The Oracle would be a target of attack if I were to put my security hat on.
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Yes we are aligned. I would add in the scenario where it bid up to a point and stopped the fees would take over as the primary driver of further payment. At which point it would be easy to promote a campaign to pay the rest of the debt or allow some whale that wants to stable boring income stream to buy up a large amount where the fees would be significant. Then there is the secondary market and liquidity pools to consider.
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The features that differentiated Anchor from all others in defi for me:
- Being able to place UST in Earn and retrieve it at will. It took away the friction of trading out of position into stables that I did not like. I never kept my UST in anchor earn long enough to make the 20% APY a strong draw.
- Not having to sell my Luna in order to borrow against it was another draw. I was comfortable with the 21 days to convert from bLuna to Luna
- being able to generate ANC and use it for LP, Governance
If I am to use Anchor those features have to remain the same.
what about the death spiral
I was liquidated from $37K to $0, not based on my borrow position. That was on me. Had I kept it in earn, I would have been sitting on some UST right now. The 20% APY causing the death spiral is a meme not based in fact. The math states that had the yield reserve ran out, people would be paying for the amount borrowed at some fixed rate. That does not cause a bank run. In my view other dapps in the ecosystem suffered because you could use aUST in their systems and that was pulled very quickly when the token price shot to zero,
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That’s a very smart idea
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This idea should be getting some traction!!!
excellent analogy, it is indeed of Junk status since it yielded 20% initially. This would be a function of credit (fees generated by network utilization, and the crypto based adoption and utility metric). Obviously a perpetual in nature.
If you think about it even further, USDT (fixed yield) where Luna is the Floating leg. Much like an interest rate swap. Mcap of Luna would exceed that of USDT at par if Luna generates more income + Higher risk premium appetite obviously.
The best two options would be either Stable with a band or Bond like analogy. Both need yield to incentivize the risk associated and understand it to tolerate fluctuation away from a peg.
I believe the US government was paying attention months before the SEC served Do at a conference. What I believe more people are waking up to is the importance of a stablecoin to the economic hegemony.
I understand what you say as a new person depositing into Anchor. Perhaps those old rules could be for people depositing the newly bought USTB coins. However in order to get the old UST valued again there is no other option then to lock it up.
If we burned the excess $UST supply it would naturally find its peg when there is not enough $UST liquidity to meet buyback demand. Then, while solvency is high we can mint $UST or $LUNA and profit from seignorage.
Anchor or any other Terra protocol could build their own role in the new debt economy with products like bUST / USTB yield bearing instruments described by yourself and @Amn_Qetu. There’s certainly a market for people to lockup cheap $UST now to earn yields. Given though that it’s a risky instrument like $UST is now, TFL is going to need to do the majority of $UST buybacks or we’ll get rekt as a community once again for chasing unsustainable yield with no backing capital.
Learn from the USA who sells US debt with good rates to other nations, this creates demand for fiat USD and strengthens the nation’s currency.
So maybe create a “Terra UST Debt” fintech product to sell to other “nations” or in this case - blockchain networks, that will create demand for $UST which in turn will burn $LUNA, ultimately strengthening the Terra Network 
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