Hi Terra research community,
Do Kwon said on Twitter: “12/ As we begin to rebuild UST, we will adjust its mechanism to be collateralized.”
The current supply of UST is roughly 11.2B. Lets say for example we want UST to be 80% collateralized and let the algo process exist to arbitrage the other 20% when it depegs (it wouldn’t stay below 80% very long as arb traders would buy it <80% and use redemption mechanism to get guaranteed 80%). That would mean terra needs to raise $ 8.96B. Whether UST is 50% collateralized or 100% the exact percent doesn’t matter to me, but the point is billions are needed for this plan. One might ask why anyone would invest millions let alone billions into a fallen stable coin?
1- existing projects & infrastructure are significant and include real world use cases (potential of Alice in USA comes to mind).
2- profit. UST is currently trading at 17 cents. If someone were to help back UST, they could also buy spot UST for literal pennies on the dollar before the backing was implemented (thus driving the price up) and they could later sell for insane profit. Now think about the potential profit from leveraged futures… Not every person who did this would make money directly as somebody needed to back the coin, but it could be enough to get people to invest. Alternatively, those with large investments or founders in terra projects could see backing UST as an investment in their product and this could potentially cover what couldn’t be raised from VC only seeking profit. Also, they could purchase LUNA since the potential upside is infinite and if UST has value so should LUNA.
Hope we can save the project!