Renomination, tax, bond, new luna distribution to rebuild terra system

Terra system worked well up to the crash last week. Terra’s motto “The decentralized economy needs decentralized money” is a novel concept and should be preserved. This requires a decentralized stable coin, and terra’s implementation of UST and LUNA , while not perfect, should not be thrown away. The problem with Do’s rebuild plan is that by throwing away UST it gives up the core value of Terra system and LUNA becomes a dull coin by loosing its organic relation to UST. The reason we were so excited about LUNA was the strong correlation between its value and the UST growth. With Do’s plan the new system is no longer the system we so welcomed.

Terra’s problems and solutions

  1. Too many LUNAs
    Need renomination of Luna by 100,000 to 1 ratio. There are about 7 Trillion LUNA and the renomination will reduce the number to 0.07 billion. Then issue new LUNA of 0.93 billion and distribute them to stakers, etc, per Do’s plan to compensate terra users. The distribution in Do’s plan could be modified to avoid duplicity.

  2. Depegged UST
    There are 11 billion USTs. Exchange these, less those held by LFG, with bonds of nominal value $1. To pay the debt implement transaction tax of 1%. This will repay the debt within several years. Once the UST peg is restored the bond may be exchanged with UST in steps, which may accelerate the repayment.

  3. Liquidity
    LFG has 1.8 billion USTs. Use these as liquidity in terra protocols.

  4. Broken UST-LUNA equalization mechanism
    Bank run was the direct cause of terra’s demise. A week earlier implementation of UST-BTC redemption mechanism on Astro or a circuit breaker on Anchor might have prevented the bank run.
    UST-LUNA equalization mechanism worked well within a certain parameter but was overwhelmed once the dam was broken. There are no perfect system, even a nation’s fiat money can suffer this problem. A money system is a system that must be MAINTAINED constantly. To support UST peg
    a) implement a circuit breaker on Anchor which will halt large withdrawals once the withdrawal velocity goes above a critical value.
    b) revive and build LFG reserve of BTC, etc. as the Terra system grows.

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