[Proposal] Help UST Pegging. Increase estimated minting capacity to $1200M

Agree and also registered so that I can vote. Done! Things are so shitty at the moment that I think coordinated action is key. Onwards!

5 Likes

I think there is an inherit problem with allowing UST to be only stabilized by Luna. There are other projects that allow people to buy bonds which can be redeemed if the price of a coin goes under or above PEG. Although Luna in theory does this. I think the risk should be spread along multiple assets. Since we are dealing with speculators, the Terra ecosystem should also have a speculative asset that can be bought in times of UST peg, and redeemed when the PEG is broken. This asset class should be pherhaps part of the UST coin, like there is an interest bearing part, there can also be speculative part to UST. Speculators can buy off the spefulative part of UST for a fraction when the PEG is off (they must buy this with USDC, USDT, and other stable collaterized assets). Bringin liguidity into the market. Then redeeming it, when the PEG is back on. For Luna, UST, and pherhaps even Bitcoin. Of course this would have to be carefully managed to prevent sell offs leading to a run in the bank. These are just my thoughts.

6 Likes

Suspect anon attacker is trying to put downward pressure on Luna price directly now, so that even after this proposal is passed, we do not have enough absorbing capacity. Recommend LFG to obtain capital injection from external party alongside with this suggestion, so that Luna price can recover to certain level when this proposal is passed.

Also I would like to highlight that the concept might be bit complicated for most simple users dumping UST now. It is crucial for us to recover trust from broader community. Therefore we have to provide easier version of reasons why minting/burning mechanism has not been working well for past two days, and what will be different once this proposal is passed. Agree that initial movement was triggered by speculative traders but have this feeling that many of common users are dumping their UST to market at discounted price just to protect part of their investments.

We need to persuade users who have been depositing in Anchor to stop this madness. We should persuade users without high degree of knowledge that they will be able to redeem their investments in full shape once they stop dumping and wait for effect of this proposal to kick in.

8 Likes

Is this increased 1200m minting gonna really help prevent future attacks. seems like Terra has been increasing this minting capacity from a low of 20m to newly proposed 1200m.
at this point it seems that the effort is to make the peg, but who would trust UST anymore when UST depegging seems to be the norm every few months.
the may 9,2022 attack was one that started since Terra started to start buying Btc which gives so much more liquidity for any entity to go up against TFL.
there are so many hedgefunds out there with much larger capital than TFL and wouldnt this increased mint allow the same kind of attacks in the future with larger amount of capital . that is even assuming that UST ever re-pegs

whats the game plan if UST doesnt re-peg. like a foreign currency that is trying to artificially hold onto its peg agaist USD when market doesnt believe the local currency.

3 Likes

no offence but there is no point of assuming situation where UST does not repeg. Then it’s done.

1 Like

Would be good for LFG to wait until a later time to ingest liquidity.

Out of LFG’s $3.5B capital, $750m were loaned to trading firm to bring UST back to peg. Nevertheless, such trading capital is too small in face of a $10B redemption need.

Once a good portion of excess UST has been burnt, possibly $8B - $10B, LFG, or any other investor, can step in and start to squeeze the shorts.

Some patience will win in the end of the day.

6 Likes

Get your point on the timing for capital injection.

Realistically, can we really burn $8-10bn of overhang UST solely with this proposal, with current Luna price? Thought there’s maximum cap on the number of Luna that can be minted at the end of the day, and there would be continuous downward pressure on Luna price. Not so sure how much of UST burn can we absorb.

It would be crucial for us to stop retail guys selling their UST in binance to stop this madness. Sorry I have edited my original text, please refer to below idea (it’s not a suggestion of capital injection):
"Also I would like to highlight that the concept might be bit complicated for most simple users dumping UST now. It is crucial for us to recover trust from broader community. Therefore we have to provide easier version of reasons why minting/burning mechanism has not been working well for past two days, and what will be different once this proposal is passed. Agree that initial movement was triggered by speculative traders but have this feeling that many of common users are dumping their UST to market at discounted price just to protect part of their investments.

We need to persuade users who have been depositing in Anchor to stop this madness. We should persuade users without high degree of knowledge that they will be able to redeem their investments in full shape once they stop dumping and wait for effect of this proposal to kick in."

3 Likes

Manual changes of the parameters is ok for now. But for the future stability, I think, it should be some sort of adaptive by it self, I mean it must be mathematically linked with the difference between UST and $1.

3 Likes

this proposal doesn’t provide any long term fix and does nothing to prevent this from happening again immediately after the peg gets restored.

First we need to incentivize current UST to HODL (perhaps via incentivized lockup?) before we can consider restoring the peg. The peg won’t get restored as long as people are trying to dump their UST.

4 Likes

I’m not an expert by far, but I see people talking about restoring the trust to reduce the selling pressure. As an end-user i’m surprised by the weakness of the communication and I think a better communication communication could help a lot. It could be good to build a clear communication plan

4 Likes

yes thats worrying indeed. in its current form why would anybody bother to buy UST to bring it to its peg. Luna token wont have anybody even touching it with the amount of minting to happen in the coming days.
Terra could be in some real difficulty. why would anybody provide capital at this point to Terra to defend the peg. could be a lost cause.

1 Like

One thing I am extremely frustrated about is how the team at Terra had no playbook for this kind of scenario and now they’re scrambling for a hail mary

2 Likes

this means you first kill luna and after you hope to become live with CPR

Up to this moment, ~$3B UST has been burned.

The burning speed has been too slow, due to the capacity bottleneck. Higher mint/burn capacity will help market get to equilibrium faster.

https://terra.smartstake.io/history

If $LUNA issuance do hit the upper limit before $UST peg, it will need governance procedure to increase or remove the limit.

Otherwise, $UST will go down significantly until such increase is established.

As for LFG stability fund, the best time to bail out the protocol is when total $UST + $LUNA market cap is about $3B - $5B.

The market has its own forces. Unfortunately, we cannot control mass mentality. Some people will panic and withdraw and take a loss.

1 Like

Merhaba size sonsuza kadar güveniyorum ve başaracaksın sadece bir kahve doldur kendine ve biraz dinlen çok iyi yerlere geleceğiz biliyorum :pray::pray:

Alter the mechanism for the time being. By adopting a similar mechanism to Frax, except 50% USD and the other 50% being as is.

A market is a market.

Having an artificial bottleneck of mint/burn capacity is the key reason we are all in the current position.

Unfortunately, there is no easy way to save both $UST peg and save $LUNA price at the same time. Something have to give.

$UST peg is the core of the confidence for Terra and Ecosystem.

Bail out fund should be consider when bail out has become feasible.

Yes, completely agree with you on the logic here. I am not here to debate you on it, I’m one of the builder community and supporter of yours.

Your answer is clear enough for me, it’s logical, so if this is well spread to the public, I think sell pressure will be relieved significantly. Can LFG make an educational material for this proposal? I am seeing thousands of people are retweeting Do’s twitter but think only 1% of people are truly understanding the mechanism here.

Explanation on 1) how bottleneck caused spiral here, and traders speculating/front-running + people bank-running caused issue 2) how this proposal will remove bottleneck in relatively ‘short’ period (I think 2-3 days would be sufficient under current assumptions) and 3) such expectation will be led into faster pegging, and hence even no need for burning excessive amount of overhang USTs, because once UST peg is restored, people will comeback home in easy words would be very, very helpful.

Also from my perspective, 4 pool is going live in Curve next week, and unless gauge changes meaningfully, we would all be fine thanks to market mechanism next week. Understand LFG would not be possible to commit on it given we never know what will happen for next vote actually, but it seems like people completely forgot about 4 pool now. This should not be irrelevant with restoring the peg in longer run, so it would be also helpful to recover trust here.

4 Likes

Look guys, right now is an emergency. We need to burn the 14 Billion UST that left anchor and ASAP. This will do the trick. Luna price can go down to 0.00001 cents for all we care but without UST holding peg its worth 0. So lets put our disagreements aside and argue later when we still have an anchor to chat on.
i would actually hope to bump it even higher but I don’t think thats possible at this point. arb bots will be able to move this capital quickly with the changes though.

10 Likes

Again, I am not debating here. I just want TFL to better communicate with the community. Most simple users still don’t understand what this suggestion implies, and that’s the reason why there’s still binance dumping.

People were relieved that Do twitted something so the UST was going up to 60 cents but then people read proposal, didn’t understand one inch of it, and they were disappointed that there’s no imminent capital injection, so there’s selling flow again.

As a builder I understand it is super hard to communicate properly with simple users. Explanation does not have to be 100% accurate. Let’s use their words so that people can understand, and broader users can know what you are proposing here.

9 Likes