[Proposal] Set USTC Peg at 0.01 USD (Future Increases to Be Made by Increment via Governance)

Governance & Proposals
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Summary
Since its inception, Terra Classic’s objective was to be the “leading decentralized and open-source public blockchain protocol for algorithmic stablecoins”. (About the Terra Protocol — Terra Classic Docs documentation)

Notwithstanding the collapse of LUNC and USTC that took place in May 2022, we are of the view that this main objective of Terra Classic should remain central if the community wishes for Terra Classic to have the opportunity the thrive again in the future.

For many actors of the crypto-industry, the faith of LUNC and USTC are intrinsically connected and the only way for one asset to have a shot at survival is for the other to also survive and keep at minimal degree of utility.

Considering the above, as first step for a full relaunch of Terra Classic (which would include to reactivate staking/governance; please refer to Revert staking security patch by Raider7019 · Pull Request #776 · terra-money/classic-core · GitHub), we propose to gradually repeg USTC via governance.

As first step, we would propose to peg USTC to a value of 0.01 USD. Then, gradually as the market cap of LUNC and USTC stabilize and (hopefully increases), we will propose to increase the on-chain peg by increments of 0.005 USD.

Please note that this proposal does not require a lot of dev work (by opposition to LUNC-PROP-3568) as it would only requires validators to vote for an on-chain of 0.01 USD instead of the current value of “1” currently used.

The implementation of this proposal would send a signal to the industry that USTC will soon recover some of its utility once the next step of reactivating staking/governance is done. This is important because if USTC loses all of its utility, it faces dlistings from majors CEX and such dlisting could come in the form of a dual dlisting of LUNC and USTC.

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Right now it could easily be done, also, LFG org can buy 90% of the whole MKT supply using their reserves, that would certainly be enough to stabilize the price at 0.01

Look at my proposal it is similar to yours, I had proposed over-collateralization using BTC… at the stage, it would also be possible to do with very little capital employed, 100% doable, we need someone to implement these ideas…

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I think at the moment the community should not make anything having in mind the “TFL” will intervene.

TFL has clearly stated that it is focussing on Terra 2.0, not Terra Classic.

Hence, I think it is more more realistic to do things assuming the community is acting alone.

Currently LUNC market cap is 4x higher than USTC market cap. Hence, a peg at 0.01 USD to start should be safe.

Overcollateralization is a good idea and could be done in the future with proposals such as LUNC-PROP-3568.

That being, we need to do something now before the industry at large judges that USTC (and consequently LUNC) has no utility and major CEXs start to dlist both asset while everyone is waiting for TFL to intervene (which will not happen given the public information currently available).

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