[Proposal] Terra team buys back USTC and makes it repeg

As in the proposal they can get fund from community pool and other investors

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In theory this is a good idea, but in reality it’s not that easy. The moment they start buying the price goes up, and the more they buy the higher it goes.

My plan was something similar and can be done with an independently run Classic Nerwork.

Obtain collateralized debt and throttle buyback and burning so it is done in smaller increments.

It could be done with $100 Million to start

Buy up over a longer period, then once you purchased the full amount, burn 75%, and save 25% to repay the entire loan in the future.

Say with current rates, and expected rise of a few pennies average reLized price is $0.05/UST.

That means we buy 2 Billion coins in total.

We burn 1.5 Billion of them and put the remIning 500 Million UST aside for later.

The price will start to move up due to the burn and the collateralized debt consisting of 500 Million UST is backing it up adding more value.

While this process is going on we are further adding coins as we ALSO implemented a 3% tax which half goes to burn.

So by buying 2 Billion UST tokens we also sent an additional 15 Million Tokens to be burned and 15 Million tokens to back up UST. so total is now 515 Million.

Added the transactions from both LUNC & UST others adding to the tax fun of which half is burned, and this begins to snowball.

Similar process for LUNC as well.

On e we repeg, that 515+ million UST That cost us $100 Million is now worth $515+ million. Payback loan and that leaves us with some solid backing. We can then sell and buy more safe investments with that money to back up UST giving LUNC value.

This is part of my plan

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If only we could get LFG to give you that 100mil from their reserves to enact this plan. I suspect the whole point of them doing LUNA2 was so they could completely abandon the UST debt and pretend like what they’ve given us in terms of the network distro is restitution.

Do Kwon does mention that the distribution to UST holders would be “in addition to best efforts to make UST holders whole” but he never goes into what those best efforts will be. With a current marketing of roughly 250mil USD, a great deal of UST could be bought back with their reserves though.

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Actually this is in part the route (Well one of the routes) I was suggesting. The 100 (or more) loan could come from TFL and or Do Kwon himself. I would approach it like a no interest loan or a low interest (paid in tokens) loan as a means to show he is doing everytbing he can to help the community. It would be a positive pr move for them. He could even donate some to the fund as well that would be cool too.

This is how I will approach them on tgis. Also CZ as well

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where did you get your financial background deathstar ?

So you want to implement a 3% tax on a stablecoin for each transaction.
Who is going to use a stablecoin as stablecoin with 3% transaction cost?
That is just nuts.

Now your buyback plan.
You buyback UST with 100 million USD to sell again part of UST to get the 100 million and profit back.
So with what exectly will these sold UST be backed?

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  1. The 3% tax is a temporary measure to bring down circulating supply and repeg. Further before getting pegged people will be buying as an investment coin, not stable coin. Until it is repegged its not behaving like a stablecoin thus a tax is not a disincentive at all.

  2. What part of burning 75% and holding 25% to sell later at the pegged value of $1 doesn’t add up? When you sell it later you’re using the funds to buy other quality and more safer cryoto/stablecoins to continue backing up the UST YOU JUST SOLD! If you sell $500 million of UST and get $500 million of BUSD for example.

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I’ve been following what you’ve been posting lately and it seems to me that everything makes a lot of sense, I think that all the people who are against you are people who don’t want Lunc to recover, etc., I’ll support you, keep going.

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They can also propose a 2-4 year staking plan for USTC holders who would like to be made whole. Meanwhile buy back slowly at low prices.

$10B in Stablecoin is not much!

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The snowball effect from people investing in UST to ride up to $1 is nearly impossible to calculate and likely would be one of the strongest forces in getting back to $1.

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In my opinion you are underestimating the ability and strength of this community to right this shop.

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you are right…in crypto/stock markets, market confidence in future is gold…is PRICE!!

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you are aware with a 3% transaction tax you instantly k.ill all dapps on luna ?

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agree…tax doesn’t work and is unfair for traders and investors

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Not everyone is selling their ust at 2 cents. So one cant buy all the ust for 300M. I don’t have the data but depending on the peoples sale price, it would cost anything between 300M to 18 billion. I would guess average sale price of everyone should be close to 0.9$ only a minority would sell for a few cents then the price would ramp up

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after burning the ust in the community pool, the total remaining supply of ust is only 10 billion, bro

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i will sell all luna airdrops , and i will buy ustc market buy , and i will withdrawal it to my wallet , then stake to anchor again , that will happen as UST burn aUST mint , what do you think ?

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Oh okey so the maximum price would be less than 10 billion. I think maybe 300 million is too optimistic but with a few billions, a great impact on price could be succeeded. Maybe 0.9 if not exactly $1

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you can buy all now.

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The buy back suggested is doable. As of today (5/30/2022 at 5:22am CT), they would need $317,561,386.53 to buy UST back over the counter (OTC). They would need to buy back 11,611,019,617.16 UST in one or multiple OTC orders (dark pool if they were concerned the OTC process would leak to the public), leaving a circulation supply of 326,490,913 UST.

  • price * circulating supply = market cap
  • Using the above formula we plug in today’s values for UST
    • $0.02735 * 11,937,510,530.16 = 326,490,913
    • circulating supply needed at $1 = 326,490,913 / $1 (circulating supply needs to be 326,490,913)
    • current circulating supply 11,937,510,530.16 - 326,490,913 = 11,611,019,617.16 (UST purchased and either moved into reserve off the market, or burned - economically, when a supply is moved out of circulation, the market will adjust as if it does not exist)
    • $0.02735 (current price) * 11,611,019,617.16 (UST needed to contract supply to increase demand and increase buying power of 1 UST = $1) = $317,561,386.53

Here is the problem - and quite frankly, this is what most people keep missing about the mint/burn issue:

  • Problem:
    • UST, with the exception of what is left from the LUNA Foundation Guard (LFG) reserves, uses a working reserve (which is the LUNA Market Cap - actually the underlying buying power of LUNA as a working reserve). This is not a problem if people hold on to their LUNA when the market tanks, but the human factor is to preserve their personal investment, and so they exit the market and take their capital with them when they do. This creates a snowball effect for the loss of reserve. This is one reason why a catastrophic reserve would need to be built in if the system was to retain UST (at bare minimum 110% - 150% of value, none of the reserve that backs UST should be UST, and the majority of the reserve should be outside of the working reserve). In addition, LFG supposedly took ~800M to purchase LUNA to help prevent a proof-of-stake attack at the time (their explanation), but as I look I never saw the amount of staked LUNA increase in the voting pool, and as I looked at the charts I never saw the spike in LUNA that you would expect to have seen (since ~800M dropped into the market, at a time that the market cap was between 1.5 - 2B, should have made a pretty significant effect on the price by reducing the circulation of a good portion of the supply). To be fair, LFG may have set the money aside just incase they felt the need to do this, but chose to keep it on hand for other needs upto the point they actually needed to defend their stake.
    • So, even if they were to stabilize UST, without shoring up LUNA (the working reserve), they would not be able to keep it pegged. Without addressing the issue of mint/burn hard coding on burn rate - instead of adjusting it to volume pressure. What I mean is that each mint process carries through to burn, even if multiple instances of the process are done asynchronously (ie. it mints LUNA [thereby diluting LUNA supply a little bit by taking buying power out of the current LUNA’s in circulation and using that to purchase UST], it buys UST on market, it burns UST [to reduce UST supply, thereby driving up demand and as a result driving up buying power [underlying value] of UST). This means that you do not have the run away minting with a burn rate that was hard capped to try to prevent other types of market manipulation, but which then ended up failing in this scenario and creating a run.
    • The other issue is that they should never close the market again in a scenario where you need market value entering the market. By closing sells, it closed buying (to be fair, it was done to keep people from creating arbitrage in a situation that would further drive both UST and LUNA into a counter productive situation). This also needs to be changed to base upon market volume pressure. Either when market pressure is high, or even all the time. It needs to not focus on the external exchange markets, but only on the market for this blockchain specifically. You keep the ability for purchase by doing what exchanges do, you only allow market making orders (and exclude taker orders). To keep someone from gaming the system further by driving the market in a certain pressure up or down to get the market making post order to fulfill, you add the condition so that it is market-making + has-to-help-market-peg-UST (if it does not, then it will not allow the order). If there needs to be incentives, you could cut fees down to a minimum, but you do not allow it to cross this threshold for market-making + has-to-help-market-peg-UST - in this way, you keep buys open, but only if it helps to repeg.
    • You also stop focusing on other markets (with the exception of anything that is in your reserve portfolio). You always create it, similar to other stablecoins, where no matter what a person buys UST for on the external markets, they always know they can come back to your blockchain and sell it, or buy it, for $1 (or whatever the stable peg is - since if you were to attempt a recovery without significant increase in reserves, or venture capital, then it may need to work with the market cap you have, and start at a lower peg for a time until the reserves build up to the point of moving it back to $1).
  • mint/burn issue:
    • People keep thinking that you can just burn LUNA or UST. Unless you want someone to end up in prison for violating fiduciary responsibility (for cooking the books), then you have to follow appropriate monetary policy and accounting procedure. LUNA and UST are both assets (I know people keep saying that LUNA is a liability, or equity - read here to understand this issue. When LUNA is minted and used to buy UST, the buy is a liability paid for by the LUNA asset. Both pools need to stay in balance. The place where value may enter or consider both pools would be equity (the net value between them), even if that equity in a perfect world would be $0 (which it rarely is). The formula is Assets(A) - Liabilities(L) = Equity(P).
    • To burn LUNA (in order to reduce the supply and drive up demand, and therefore underlying value [buying power], you have to buy the LUNA first, you can’t just burn it - at least if you are upholding fiduciary responsibility).
    • There was a lot of LUNA minted in order to buy UST (and burn the UST). The process should finish out, the minted LUNA that was minted for the purpose of repegging UST should finish the market buy of UST, and then the burn of UST (the mint / burn is really just a way of using the LUNA reserve to balance and keep the UST pegged, and is really a form of buy / sell). This would drive the underlying value of both coins further up (removing the LUNA that was minted, and burning the UST that was purchased, shifting the value from one pool to the other, - it actually allows both pools to be properly balanced, instead of the LUNA pool being overly diluted), which in turn would incentivize trading due to the demand increase, which would then also provide for building the market cap back. The process works in reverse when UST gets too high above the peg. See the charts in the links in this post for a nice and quick visual.

From a business perspective, I would take a guess that the top three LUNA owners are the LFG, Do Kwon, and possibly Daniel Shin. They are not going to let this community go. They have relationships with the major investors, the validators, and the builders (each to differing degrees). They banked on rebranding through starting a new project, and hoped that time would make people forget, or at least tolerate (in say 6 months that the worst of the distrust would pass). But, in doing this they alienated the one constituency that are the consumers and community of their product (the monetization that TerraForm Labs does around supporting the governance community) - the very LUNA community itself. They know this community would become a competitor if it was allowed to stand freely against the new Terra 2 project, and so the only way to keep them, is to prevent them from exiting (so far it appears that they are intending to roll the Terra governance community into the Terra 2 governance community).

Allowing a separate classic community to grow up means that all the trust would move with the community to that chain - so they can not let that happen. Do Kwon was involved around much of the thinking that built Terra, some he contributed directly, other portions others contributed - but this is a big part of what he has worked for, he is not just going to let it go (and even if he wanted to, any venture capitalists most likely know that people are not going to forget the billions in losses, and are going to council him to do what he can to capitalize on keeping this community - even if they grumble). It was the risk he took, and what happens from this point will determine if he is successful (from the path he took in terms of business), or how the community responds - and whether he overplayed his hand (which I believe he did, people don’t forget Billions of dollars of loss and the real effects it has taken on their lives, including people in developing countries that may have been in the Anchor pools as well, and felt the loss in a way that was even more magnified). As one person quipped on these boards, something akin to, “don’t be the villain [by forking and rebranding], be the hero [by staying with the community and fixing the problems, and thereby restoring trust]”. Add to the fact that in about 6 months, many of the investigations into charges, and previous charges that were there before the crash, that have been leveled at Do Kwon or TerraForm Labs, including probably new charges that may come along the way, will begin to move toward actual trials. This will add uncertainty to the trust value as well (and not to mention stress on him particularly, and finances to his and TerraForm Labs legal team). He knows he has to keep the community to have any hope of keeping people in the system - to let it go would move the trust off the new chain and become his competitor (particularly now, when all the builders are already coded for the current classic chain, he needs to keep everyone involved with him or else it will not work for the new chain). Terra classic is the life boat for him. There are still options for the community as well depending on how it responds, and how TerraForm Labs responds.

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We’ve set-up a validator on Terra 2.0 that will buyback USTC with the commissions earned.
USTC repeg is still possible and could bring back the seignoriage and the LUNC burn. This would not solve everything but it could help Terra. Imagine if the peg is finally restored !

A website with the total amount bought back is underway.

If you want to participate, delegate to us : station.terra.money/validator/terravaloper15gs5cy87n5jxddf4vq94efre9uwkrt9xaaw9z7

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