Terra Ecosystem Revival Plan 3

This is a living proposal. I believe the powers that be have misstepped throughout this crisis and following them into a fork is just another in a parade of errors.


Crypto is a promise written in code. Forking and running away is… forked up. Trust is earned by following through.

The promise written in code is NOT a stable 1$ UST or $100 LUNA. It isn’t a guarantee of investment or a protection against loss.

The promise written in code is a USD tracking coin with eventual USD parity driven by arbitrage and backed by the market cap of LUNA.

The coins were tested, and they faltered, but it is the humans who are killing them. It was the humans who squandered the reserve. It was the humans who failed to address hyperinflation,and worse, poured gas on the fire. It was the humans who halted the network repeatedly, resulting in days of stuck coins and panic.

Let’s let the algorithm do its job. If we do that then UST will eventually reach parity and LUNA will grow in value again.


I propose the path forward is:

  1. Re-enable staking. At this time any participant who wants to can access equally inflated LUNA to add to their staking.

Staking must be enabled for governance votes to be legitimate.

  1. Burn Excess UST

UST supply must be reduced to match market demand. Supply grew by 16 billion in less than a year, it is going to take some time to unwind.

UST growth went hand in hand with LUNA appreciation. LUNA did not exist at $100+ without UST. Similarly LUNA can’t be restored without restoring UST.

The following changes should be implemented to support this.

A) The remaining 63 million of reserve value should be used to establish a “burning floor”. The burning floor will be an alternative swap mechanism that allows swapping UST for a proportional amount of the reserve assets. This will serve as a minimum redeemable value for the token and ensure a market always exists for redemption. The burning floor is an emergency pressure release.

A mechanism is needed to add to the reserve on future UST mint, but that can be figured out later.

B) The swap algorithm should be updated to change the exchange rate of 1 UST = 1$ LUNA. The swap rate should be the lessor of 1$ LUNA or UST Oracle value + 5%. The exact margin can be flexible but should be the minimum necessary to encourage arbitrage.

C) Re-enable Market swaps.

D) Work with DEX/CEX partners to voluntarily disable UST->LUNA swaps in favor of Market swaps. This will help accelerate burning.

  1. Restore LUNA

LUNA must continue to inflate in the near term as the backing token for UST. It is vital to be vigilant in adjusting swap rates for UST → LUNA (B above) to minimize inflation.

Salt in the wound, if the reserves had not been burnt on UST at near face value they would be able to support a burning floor right around the current trading price of UST. That horse has left the barn though so we have to do things the harder way.

Luna will not going to 80$ in the near term, but just as Luna went from $15 to $115 in a year it is perfectly reasonable that Luna can 10x from current values once stability is shown and trust is earned.

Your feedback and improvements are solicited and welcome.


Well done :slight_smile:

valuable input, +vote …
I put forth a similar solution/proposal if you want to check it out

Anything is better than the current “Abandon ship and we only have a few lifeboats” plan.