[Proposal] Terra Ecosystem Revival Plan with $UST2 Stable Coin

Governance & Proposals
1

Summary

There are a number of proposals to reset LUNA block chain.

However, most did not address the importance of stable coin to the Terra Ecosystem,

Terra Ecosystem won’t be Terra if it does not have stable coin and the protocols associated with it.

Resetting Terra without stable coin, its ecosystem will not create significant value.

Here is to propose to recover the Terra Ecosystem, keep the stable coin Ecosystem, while would be financially feasible:

  • Reset Terra to May 7th, 2022, 00:00 GMT (00 hour just before the de-peg event)
  • All $LUNA holders continue to have same $LUNA2. Let market decides $LUNA2 value
  • For every two $UST, issue one $UST2 , same for other stable coins
  • Give time for each protocol to integrate with $UST2 to help user recover a discounted value

Motivation

It is impossible to restore the original value to the Terra ecosystem. This is confirmed by CZ, and by @dokwon here

As @dokwon mentioned, $UST is a debt obligation to Terra.

For the recovery plan, instead of granting $UST holders new token with variable value, it would be better to grant $UST holders fixed value token at a discount .

At 2:1 ratio $UST to $UST2 conversion, this will immediately reduce the outstanding debt obligation from $18B to $9B.

Combined with $LUNA2 cushion and stability fund, it will create a sustainable ecosystem for the next version of Terra.

Proposal

Here are the steps:

  1. Halt the current Terra/LUNA chain
  2. Reset LUNA2 chain block production with snapshot at May 7th, 2022, 00:00 GMT (just before the de-peg event)
  3. During initial phase of $LUNA2 chain, halt all stable coin transactions initially
  4. List $LUNA2 on major exchanges , let market decides the $LUNA2 value
  5. On $LUNA2 chain, for every two $UST, issue one $UST2 . Similar for other stable coins
  6. Give time for all protocols, such as Anchor, Mirror, Pylon to convert user’s deposit from $UST to $UST2, with 2:1 ratio
  7. Work with Wormhole bridge, issue $UST2 token for other blockchains, with same 2:1 ratio
  8. Increase Mint/Burn capacity as in Proposal 1164
  9. Increase min_spread to 1% and use it as stability fee to contribute to stability fund.
  10. Establish stability fund ahead of time, and plan to purchase $UST2 at discount if it de-peg
  11. Enable stable coin transactions on Luna2 chain, and list $UST2 on major exchanges

Why we must recover $UST

$UST is the soul of Terra Ecosystem. A new protocol without $UST stable coin won’t have enough value for the user communities.

There are many other competition to Terra. Without the stable coin Ecosystem, a revival plan will have low chance to the upside.

Why recover at discounted value for $UST

It is impossible to sustain $18B $UST obligations with Terra Ecosystem, as evident by the collapse.

The $UST holders must give up a portion of the value for the Ecosystem to recover.

50% discount is a psychology number that can continue to retain a good portion of user, in face of this catastrophic event.

Terra Protocols

Protocol integration, such as Terra, Mirror, Pylon, is important to the Terra community.

The recovery plan should include the key protocols.

Issuing $UST2 stable coin to the original holders will help the users and the protocols.

Cross Chain Deposits

A number of cross chain protocols hold a large number of $UST. E.g. Curve, Uniswap, Saber, etc.

Work with Wormhole to issue $UST2 for every two $UST will help user community recover a portion of their value invested in stable asset.

$UST on Exchange

Similar to other part of the plan, centralized exchange can claim $UST2 for every two $UST from the snapshot block.

Exchange can provide $UST2 airdrop to its users.

Comments

Please kindly share any perspectives and suggestions.

Thank you.

2

Proposal:garantee and peg the ust to current price 0.2 dollar, then use half of the income profit from luna price increment to raise ust price with time, and use any other source money to burn as much as luna, and last!Show a plan that this crash would not happen again!

3

Revival of Terra will require collaboration and participation of all key protocol.

Without them, Terra is not Terra.

1 Like
4

It is possible to have a different ratio for $UST2.

Let market decide based on $LUNA2 market cap when it is re-listed to major exchanges

5

The LUNA2 snapshot you propose does include the UST holding status at the same time (before depeg) right? and the UST2 airdrop is also based on the UST snapshot before depeg?

Otherwise people who buy UST at a huge discount and reward $0.5 each UST would be extremely unfair

6

RESET is useless when there are people who held and bought the way down. Reset is just another term trying to save VCs, Do, and Terra who merely watched and created this mess.

7

The snapshot is taken before the de-peg event.

This is similar to @dokwon proposal to take a tick before de-peg happened.

Those people who bought $UST at discount will be after the snapshot time, and won’t receive anything.

8

The RESET is similiar to @dokwon proposal. Only holders at or before the de-peg event will receive new token.

1 Like
9

What we need is sustainable plan to save current ecosystem and infrastructure. I cannot believe Do Kwon and others irresponsibly saying current chain is GONE when they did nothing to protect it. Current trading volume is close to $8B, if the chain is useless, we would not see this active trading going.

10

The chain is not gone.

But it will need resetting…

11

So if this proposal pass, current LUNA and UST in the open market will be left free run after the hard fork create? also their value is decided by market and has no relationship to LUNA2/UST2?

12

LUNA2 will fail

1 Like
13

Yes, that’s right.

The current $LUNA is already beyond repair.

What is fair to the user community is the snapshot prior to the snapshot (or tick per @dokwon proposal)

14

If the entire community believes LUNA2 will fail, then it will fail.

If some part of community believe LUNA2, then there will be a community.

@dokwon proposal is also LUNA2, from a tick before de-peg.

15

@gs390, thanks for taking the time for this your proposal.

What about the people who were using UST in other protocols off-chain?

It looks like we need an organizational framework first from the community, Terra Team, @dokwon, etc. to manage the situation day-to-day, with strong communication…

Also, can you please provide some feedback/insight into this proposal:

It seems like both proposals can be consolidated.
Thanks.

16

For all $UST holder at the snapshot, they receive 0.5 $UST2, including bridges.

The bridge owner, such as Wormhole, will need to provide mechanism for $UST holders in other block chain to obtain $UST2 at 2:1 ratio.

17

Agree.

The key is $UST need to continue with a new form, that is sustainable, and can continue to bolster confidence in the community.

19

But let’s say users were borrowing against their UST off-chain, and got liquidated after the severe depeg. How can we handle their loses?

21

If I read correct, I think kwon’s proposal is a little different from yours, he seems only want to snapshot the LUNA status before de-peg, the new LUNA2 token will be airdrop to people who hold LUNA before de-peg (snapshot time) and people who “currently” own UST.

which I think it’s very unfair to UST holder before de-peg, they are the one who sell at a significant loss and won’t receive any airdrop if they don’t buy it back (currently at higher UST price, many people sell at < $0.1)

22

These usually happens after the de-peg (or the snapshot, or the tick per @dokwon)

If user holds $UST prior to the de-peg, they can get air drop.