[Proposal] Tiered repayment: 1:1 USDC refund to all UST holders up to a certain cap per-wallet using LFG funds, favouring small wallets

@frederick I don’t think small holders selling in panic should be punished. You do bring bring up a valid point however. How could a refund logic look like that will bring small holders as close as close as possible to their holdings before depeg, even if they moved funds?

13 Likes

The reason I don’t like a simple snapshot + airdrop is because the method is agnostic to people who sold their UST, and they would get double-rewarded. The snapshot would determine the refund amount they are entitled to. Once that is done, there should be a process where they can turn in their aUST/UST and redeem USDC/USDT 1:1 at a rate capped by the snapshot.

31 Likes

frederick - the idea is you would have to return your 100k UST in order to receive your 100k USDC, so it wouldn’t matter whether you sold afterwards or not. You would not get double-rewarded.

20 Likes

I think we could also consider a locked staked luna proportional to their UST/aUST at a discounted rate.

That would not require TFL to sell any Luna to the market for usdt/usdc lowering the Luna price even more reducing confidence while rebuilding.

1 Like

I agree as well!. I consider that the following suggestions fit with this proposal:

  1. Because it is an extreme emergency situation, it could be considered to remove the interest and repay the original amount deposited to the small accounts.
  2. A system of fixed terms could also be implemented, blocking exits and repaying in 90 days, 180 days, for example, dividing according to amount tiers and according to the available capital
  3. Complementing the improvement that these procedures would mean for the ecosystem, then on that return of trust, Luna staking could be stimulated, also for fixed terms, trying to absorb circulating
1 Like

I don’t think LUNA should be involved in this program in a direct manner. The ultimate purpose of UST was to be an algorithmic stablecoin pegged to the US Dollar. LUNA was a deeply fascinating mechanism, but it isn’t working right now, so we should put it to the side.

I support the funds that TFL pulled out of the ecosystem (primarily in the form of LUNA) being used for this program, as one of their roles in the community is to protect the peg, which includes making users whole. We should keep it purely to USDC/USDT, both for simplicity and for confirmation that the agreement has been adhered to and the promise kept. Once TFL exchanges the 99%ers UST for 1:1 USDC or USDT, they can safely burn the UST and they know they have completed their end of the deal. People will be satisfied and grateful. Giving them any form of wrapped/fractional LUNA would not be in the spirit of the motion I’m trying to pass here and to be honest would feel like another swindle. Mistakes have been made and it’s time for us to face retribution honestly - by looking it in the eye.

53 Likes

But considering that they need to get the usdt/usdc somewhere, they have to sell either Luna or UST at a discount and basically that would kill the whole blockchain?

By compensating with Luna we are ‘forced’ to be a part of the journey.

This would also increase decentralization since there will be larger Luna holders on average.

I’m just thinking of a solution that would benefit everyone while minimizing the risks to the network.

3 Likes

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.

31 Likes

i think those with aust currently deserves extra yield for not folding and panic selling at crazy discounts.

8 Likes

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.

4 Likes

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)

9 Likes

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!

13 Likes

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.

3 Likes

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.

6 Likes

I am a strong yes here - for UST and Terra to last we need belief and trust. This created both of those things.

8 Likes

I’m probably missing something.

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.

6 Likes

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.

35 Likes

Keep in mind, they would still have to buy back UST to redeem it. People who panic sold at say, $0.22, would now have to rebuy on the market at $0.7 or whatever the price may be.

Anyway, it looks like LUNA and UST will mostly be in a death spiral because a viable solution has still not come into play.

12 Likes

Agree