Reflecting on the Legality of Proposal #1623 (The Creation of Luna V2)

The passing of proposal #1623 on Luna V2 was illegal and against the very premise of a Proof-of-Stake (PoS) consensus mechanism.

Though it is impossible to revert this mistake. It is still extremely important for the community to discuss, study, and remember how this entire event went down.

Perhaps one day there will be proper compensation for the victims of prop. #1623. The least we can do is not forget, and be aware of the ramification this has on our community, not just Terra but the entire crypto world as a whole.

Here is my detailed reflection.

Recently because of the latest re-enable staking proposal #4095. I thought a lot about how a PoS chain works and then I came to the realization that DK’s proposal for Luna V2 creation was completely illegal. It should have never been allowed. The Terra community didn’t just lost their life savings in $USTC and $LUNC, right after that the V2 proposal took further advantage of uninformed investors when they were most vulnerable.

The vote for V2 took place while ONLY less than 0.005% of the total LUNC tokens were allowed to participate because staking was disabled as an “emergency measure” due to the crash. Time and time again you will hear supporters of this event say that the disabling of staking was meant to prevent governance attack due to the amount of “cheap” coins out there. That’s a well decorated argument but extremely flawed to its core, and here is why.

a) LUNC as a governance token of Terra, was both created and advertised base on its PoS & governance characteristics, taking that away regardless of the excuses, was a clear breach of contract. The legal aspect of this may vary by region but at least in the US, a court ruling would have been made in favor of the masses (small investors).

b) The whole “governance attack” argument was never applicable to LUNC because, by the design of a PoS system, the right to staking (and any benefits & rewards that it came with) was per contract the direct compensation for taking a long-term INVESTMENT in the network! Now there is usually a wide range of definitions for long-term vs short-term, investment vs speculation. However, in the case of a PoS network, it is relatively easy to differentiate between the two. The key is liquidity. You are an investor when you stake your tokens with the network, as this very action of yours voluntarily reduces the liquidity of your assets. In contrast, a speculator would have kept his assets on an exchange & un-staked, as it provides the most liquidity, the speculator can sell his tokens on the open market any time and front run other LUNC owners. This is especially true during a market crash. At any time regardless of the circumstances, purchasers of LUNC should have been awarded the right to staking, and the potential to take meaningful control of a PoS network. By design this should have been one of the added incentives, and arguably the most important one a PoS network can offer to its investors during a market crash. Regardless of one’s initial intention, buyers were supposed to be rewarded immensely, for quite literally catching a falling knife when the network was in extreme distress. But then as we all know, the right to staking was forcibly taken away, which effectively destroyed the incentive to invest and trade LUNC for the long-term. This is not intended as an accusation, but the fact of the matter is, everyone was made to become a speculator driven by nothing but greed, and the network suffered terrible consequences because of that. To put it in layman’s term, LUNC’s parents opened fire on the paramedics when the child LUNC was d.ying and in desperate need of emergency medical assistance. But the shots were fired anyway because the parents were afraid of losing custody of the child. Even though the child was fatally injured due the negligence of the parents.

c) Let’s step back and suppose that the entire argument in b) is invalid. As if, it was ok in a modern society under the rule of law, to judge people base on their possible ill intend (unproven) rather than their action; since the so-called governance attack never took place, but investors (especially those who bought the dip) were penalized for a crime they didn’t commit.

Ok so in that case, here is the question we need to answer. What about the millions and millions of LUNC tokens purchased before the de-peg? Justifying the sudden disabling of staking is one thing, but there should be no question that at the very least, all of the pre-crash LUNC holders should have a say in governance when they wanted to, especially on a life and death decision making proposal of the network like V2. Lots of those tokens didn’t get the chance to VETO the V2 proposal even if they wanted to. Because once again, the right to staking was forcibly taken away. And perhaps we should also include those who invested in Terra when USTC weren’t that far off from a potential re-pegging (for example in the 0.99 to 0.80 range)? The real question is, at what point exactly, do you declare somebody’s ownership of his or her private property lesser than the rest of the community?


Legality doesn’t need to be tested. In a world where verbal agreements between private individuals carries weight, cases can be made against why a PoS network (or more specifically the the people / entities running it eg. validators & LFG) has a duty to fulfill its contractual agreement (includes but not limited to network whitepaper, official articles, descriptive information on exchanges, etc.).

In my earlier post I have mentioned that V1 validators and any one involved in the passing of V2 proposal should have consult their lawyers and issue public statements as needed. But I doubt most would take this issue seriously. Majority of participants in the crypto business still believe this is wild west. They are not wrong. But the issue is things here can develop at any pace. Just like prices can go sideways for years, or crash or pump for hundreds if not thousands of percentage overnight.


Trully a remarking take in what happened. I hope this passes because it trully reflects general sentiment of the community.
Congratz and keep the good work!

Best regards,


Lunc to be the governance token of whole Terra ecosystem.That’s a great idea.


I agree also, a pragmatic and reflective piece of work that examines the role of governance as a function of the community in what should be a DAO… Unfortunately in this instance the the ‘D and A’ elements had been replaced by Elitist Dictorial Control.


Hi there,

We have started on the DAO talks and what can be done as a DAO. I spoke with US lawyers who would be interested in supporting the case.
All actions should be taken on the DAO / Community level - voted.


I would disagree tbh. There are people who are genuinely working on the revival and community.



One man’s “governance attack” is another man’s long-term investment to stabilize/control the new network. Just like the “short seller attack that broke the peg,” this was another self-serving lie of Kwon’s, justifying ever greater control and confiscation from the normies

I hope the LUNC community learns from this: concentrating power on a network is NEVER the solution, and anyone who tells you otherwise is trying to steal from you. All centralizations of power lead to asymmetric information, insider trading, and insider selling until the protocol crumbles under its own weight.

Kwon said verbatim on the LUNA v2 all-hands call, “we have YEARS of runway, nobody should be worried”. Where do you think all that runway came from? it came from relentless insider selling up until the very end.
FatMan and others have mapped over $3B of TFL/Kwon extractions from Terra v1.
It all went back to centralization of power around him, the dependency of 95% of developers and Terra-native protocols on his favor


Absolutely illegal.


It is really appalling when you dig deeper into it.
Action speaks louder than words.
The entire V2 story was there to only benefit a few special interest groups. While the rest 99.99% of people were left out, never even had a chance to voice their opinion.

If the governance system post crash was remotely democratic, then the number 1 proposal should have been either a) restore UST peg or b) how to best liquidate the remaining Terra assets and compensate as many investors as possible.

Instead we offered the same group of people new jobs, continued their “salaries” with assets liquidated from LUNC (v2 airdrops). Right after they completely failed the previous project. You can’t make this up.


I do not agree with your assessment, I lost all I had and it was a very significant % of my total nw, and I appreciate the fact that I received luna and that it was put together the way it was. I am impressed by the dev that are still building even more amazing thing on the chain…not surprised that a lot of ppl sold quickly considering all the fun and the macro environment…I am holding ( while regretting not to have taken some $$ of the table at +/- 100$) but it is what it is and whatever money situation I am in is not solved by a) liquidating at market value mu luna 2 and 2 focusing my pain as anger toward anybody by justifying any unproven far fetched allegations…

Interestingly Do Kwon had not even bother to speak about Lunc, all he talked about was the new chain.

It just reflected his sense of responsibility towards problems of Lunc and seemingly just shrugged it off.

It might really be better for him and his gamg to hand over the keys and also the reserves. Those reserves do not belong to Luna 2.0.


You didn’t receive new LUNA. It was money taken from your left pocket that got put back into your right packet with a time delay (vesting).
A clever math trick that fooled a lot of people, but a trick is nothing more than a trick no matter how good it was performed. It didn’t change the fact that LUNA v2 stole the brand name from LUNC while further liquidated investors asset through a rigged vote. Now some of that money did go back to investors of LUNC but it was a tiny percentage compare to how much the special interest groups already unloaded onto the market.

Nothing to be impressed of when people are just doing their job while receiving a salary. Or are you gonna say this is far fetched because after everything that has happened devs somehow will help DK develop v2 for free? Of course not. They are being paid from investor assets liquidated from V1. The math trick explained above.
I’m sorry that you lost a lot of money. Sorry that I have to break this to you. But it is the cold hard truth. Don’t put any faith in V2, it never had a chance. No institution in their right mind would ever put their trust in DK no matter how good the app is. In the financial market trust is everything. Trust means basic security, first thing any good investor look for is always downside protection, with DK there is none. What stops DK from starting a LUNA V3 during the next crash? This is just common sense.

Now please don’t call my assessment “unproven allegations” when you have zero counter argument. I merely presented the numbers to you and the numbers don’t lie. The V2 proposal was passed when only 0.005% LUNC tokens were allowed to vote. This will go down in history as the biggest insult to decentralization.


Exactly. The community is way more united now without DK’s influence. LUNC stands a much better chance at succeeding than v2.


all LUNC terra team fool they dot’n want to improve LUNC price Daily Circulating Supply increase

I wish people, especially those who lost a great percentage of their life savings, luck. But how this whole Luna fiasco went down and how many in the community responded have soured me utterly on DeFi. I used to oppose government regulation on principle, but it seems there are too many motivations for people to exploit financial systems to the grave detriment of others. And after everything happens, we hear the trite line, “You should have known better!” or “Never invest what you can’t afford to lose!” Seems there’s no sanctuary from human nature, whether with big traditional banks or DeFi. Shocking to me anyone is still investing in LUNA-X projects at all.


check out the developments made by Terra Rebels. Very promising. Re-enable staking & 1.2% burn tax already in test phase. Terra Rebels 🍌




The Terra Rebels team got my support from the off as the first thing they said was we arent being paid we just want to keep luna/lunc now alive and from the updates on there discord in the short period of time they have been working its amazing what they have achieved with Lunc now accepted as payment on the new Starship universe and they support the burn tax 1.2% the future is looking good at this stage still more work to be done but im quietly confident right now