Correct, they will have to get the money from somewhere. Do Kwon said he’s working on sources, but it will likely have to come from selling LUNA. TFL has already chosen to protect UST over LUNA. UST holders and LUNA holders had differing expectations and risk profiles when going into the respective projects. This entire situation really sucks for LUNA holders, I’ll admit, and there will likely be no recourse for them.
“Forcing” UST holders, who came along for the ride specifically for an algorithmic stablecoin pegged to the dollar, into LUNA, a highly volatile token, is not in good taste IMO.
There are stakeholders we need to balance and admittedly everyone will not be happy. Plus, this proposal ultimately has to fly with TFL, and they have chosen to protect UST over LUNA, so anything we suggest has to be in line with their motivations. LUNA is pretty much done.
In the long (long, long, long…) term, LUNA might come back if this plan goes through successfully and people regain faith in the team. For now, shoehorning it in isn’t the best plan.
I support this proposal. This will go a long way to restoring trust and confidence in TFL and Do Kwon’s stated intent. Yes, it is not ideal in terms of “this was supposed to be algorithmic/decentralized,” but this is an emergency and not the time for lofty principles. Real people with their real savings tied up in UST/Anchor need a practical solution, quickly, to being stuck with a massive haircut on their stablecoin.
Hi everyone. What about users who had staked UST on Anchor and other platform such as Binance who also offered good % back then.
There are many UST holders outside Anchor. That doesn’t mean that they did not trust Anchor and in the contrary chose to add UST as savings coin but on other platforms for various reasons. (Not putting eggs in the same bag for example)
I strongly agree with this proposal. If there are sufficient funds to rescue smaller holders, including almost all of Anchor Protocol’s users, they should be given priority and the opportunity to exchange their aUST/UST for USDC or USDT. Smaller holders who locked up their savings to earn passive income can’t afford this loss and should be prioritized. This would do the most good for the most people and help restore trust with the vast majority of the community. Support!
U will be made whole by new money entering system. I myself was not a ust holder but i bought into system to make money and help restore peg. Thats all that can be done. is get peg back and good emissions/tokenomics for luna stakers and push more use cases for ust to push back up luna price. I know it sucks to be liquidated in these type of events but thats the risks of leverage. Always was. People wouldnt donate to the protocol their profits. Then they are responsible for any losses. Leverage always means potential loss of capital. Always. Lets just do what we can to restore the peg and move on. Wishing on a bailout is not crypto and not whats needed here. We need to survive then thrive again.
This is a great plan, especially from the perspective of rebooting LUNA sentiment. Importantly, those who are deep deep in the red (such as myself), but are nonetheless still aspirational about luna, are not the majority that have lost trust or good will. Point being: all the right builders and creators are already with luna 100% and will be here rain or shine. It’s that 99.6% that need coaxing and reassurence.
Although I am also a small money user, I do not agree with this proposal. It is clear that no one has more priority. If there is a need to make the rich more responsible, then I think one measure can be taken as follows.
Identify the amount of expense needed to save LUNA, which we assume here to be about $500 million. Currently, the debt yet to be dealt with is $10 billion. Then this is a ratio of 1 to 20, raising funds through the community of users to come together and ride out the storm. For example, if you have $10,000 in savings, then you need to contribute $5,000 to the community to protect your savings. Not only that, but I also want the foundation to commit to providing long-term value to the members of this crisis relief community.
Why would you give money to UST holders, let’s assume the mechanics are perfect and there’s no double spend and easy to execute, to reward “loyalty” if they can be made whole by UST just re-pegging?
This money needs to come from somewhere (we assume Do Kwon is working on this) and this is just a topic of how to spend it. (a)Let’s say this costs 1,5 bn.
(b)To guarantee the re-peg we need probably 6 bn. (we’ve got 12 bn UST coins and the peg currently is at 0.5)
(c)We may use the funds to prop up Luna and continue what we’re doing in line with what an algo coin was designed to do and see if we get lucky and the money that wants to exit UST is less than 6bn or even less than 1,5 bn.
If it were my business I’d go for the last option, make sure whatever I borrow is on a flexible terms and I can return immediately what isn’t needed. Meanwhile I’d share the plan publicly so that it becomes clear that the re-peg is coming no matter what. This way loyal holders are made whole.
That’s a great question. Yes, there will be a number of smaller traders with UST dust balances who were using it as a trading pair on exchanges such as Binance or FTX. They will be an unfortunate casualty to the process. Of course, as mentioned prior, they won’t be forgotten, but their payout will be delayed.
Like I said, not every stakeholder will be pleased. We have to balance out pleasing people and making people whole. It’s the classic economic problem of scarcity. With the little funds we have, we should do the maximum good we can in the most efficient manner possible. A lot of smaller Terra investors are invested directly through Anchor. They are the easiest and best group to focus on, since their transactions are easily visible/verifiable and thus compensation/snapshotting will be much easier to handle. These things will be slightly more problematic when dealing with black box account systems like Binance, and TFL will be a bit more reluctant to go through additional hoops. This group will only be the first, as I am proposing this as one stage as part of a whole refund process.
It’s also worth keeping in mind that the announcement of this refund process will prompt eligible aUST holders who sold to buy back their UST on the open market, which will further encourage a return to peg, making it easier for people on exchanges to get directly compensated at a better rate (by selling on the open market).
Some unrelated closing thoughts. The more I think about the solution, the more perfect I see it to be. I have specifically been through this scenario a couple times in my life, and services that go for mass socialization rarely pan out well. I remember Poloniex, where people’s entire lending balances were given a socialized loss due to some traders losing money on CLAMS. No one was happy, and distrust/malintent brewed for years to come. People are still trying to sue. The Bitfinex hack, where everyone was issued debt tokens, ended up working out pretty okay. This solution is closer to the debt token issuance solution. But my favourite so far was when the bankroll of a casino got hacked and investors lost everything. With the tiny amount of funds remaining, the owners were able to refund the vast majority of users, which brought back the player base and the casino surprisingly stayed active despite the huge loss to larger investors. The larger investment holders got a debt token (instead of the 6% refund which wouldn’t have been much of a big deal anyway) but the resurgence of interest in the service is allowing them to be paid back faster. Had the loss been socialized to everyone, there would likely be no mechanism for people to get paid back.
I am 100% confident that if we make 99% of our userbase whole, Anchor will be able to thrive at a lower interest rate, LUNA will rebound in the short term, and the community will band together stronger than ever before allowing for faster debt repayment for whales and faster price appreciation for LUNA holders. It truly is the golden way out of this horrible situation and I implore TFL to carry it out.
Thanks for getting into it. I missed the part of users having to buy back UST. I mean we need to realize that some users in this scenario would profit and some lose, so not everyone would really be whole, right?
The guy who sold at $0,22 and now rebought at $0,7 is still out 50%. And vice versa if someone sold at $0.8 and just to gamble on it re purchased at $0.3 would be making a 50% profit.
I’m not here to say what’s right and what is wrong, just to hear opinions if this would deliver the desired results of making people whole and them being satisfied with this.
So is the plant to give big investors tokens, and to repay the small investors who repurchase the UST to their wallet balance on the snapshot date? Or just the second part without tokens?
Yeah, people gambling on the market would get commensurate returns. With this proposal, if you had UST during the depeg, you will be entitled to give back that much UST and get USDC 1:1. It doesn’t matter if you panic sold or panic bought on the market. That’s your prerogative, your profit, and there’s nothing we can do to control it. If you sold low you will have to pay the price and rebuy UST because it’s not fair for people to get double-rewarded with both a UST refund and the amount they sold on the open market.
Anyway, it looks like what I said came true - TFL ignored this entirely and UST has gone into a death spiral. They really should execute this plan with the little remaining balance they have to save a little bit of face with the community, and can move forward with a fresh forked blockchain. Good luck Do Kwon. You will forever be looking over your shoulder. It’s not a good spot to be in.
This is very thoughtful proposal that would help with a lot of pain being felt by the ‘small’ players. Let’s make them whole.
Forget about the UST peg and UST/LUNA relationship. It is over.
Forget about the current LUNA. It is over. We need a new LUNA - some kind of hard fork. We need this new LUNA so that the ecosystem can continue to grow. So many teams and efforts were destroyed and we should keep that talent building. The new LUNA will be worth simply whatever people think it is worth (no tie to any stablecoin).
Plans for a new Terra stablecoin can be done separately from 1-3
love this! LUNAtics are essentially the seed investors for version 2.0. I’m fine with some lockups with reasonable assurances, assuming interest is paid (maybe a more sustainable APR!) Thanks for getting this ball rolling @FatMan