There’s been several community and validator groups discussing launching a fork of the Terra chain to make the ecosystem whole from the UST depegging event. Wanted to offer my perspective on how this should be done.
As of this time, there are still several billion dollars worth of UST, and the value of Luna token has fallen to essentially zero. Even if the peg were to eventually restore after the last marginal buyers and sellers have capitulated, the holders of Luna have so severely been liquidated and diluted that we will lack the ecosystem to build back up from the ashes. While a decentralized economy does need decentralized money, UST has lost too much trust with its users to play the role.
So what remains? While UST has been the central narrative of Terra’s growth story over the last year, the Terra ecosystem and its community is what is worth preserving.
- We’ve built up one of the largest and most vibrant developer ecosystems in crypto, with some of the smartest minds in the world working on products with the best UI/UX
- Terra Station has a large install base, with million+ users across the world
- Although in distress, strong brand recognition and a name that almost everyone in the world will have heard about
The Terra community must reconstitute the chain to preserve the community and the developer ecosystem.
Validators should reset the network ownership to 1B tokens, distributed among:
- 400M (40%) to Luna holders before the depegging event (last $1 tick before the depeg on Binance should be reasonable), bLuna, LunaX and Luna held in contracts should also be recipients, minus the Terraform Labs account at terra1dp0taj85ruc299rkdvzp4z5pfg6z6swaed74e6. The new chain should be community owned. Preserving decent ownership of the network in its strongest believers and builders is important.
- 400M (40%) to UST holders pro-rata at the time of the new network upgrade. UST holders need to be made whole as much as possible
- 100M (10%) to Luna holders at the final moment of the chain halt – last minute marginal luna buyers should be compensated for their role in attempting to provide stability for the network
- 100M (10%) to the Community Pool to fund future development.
- All Luna besides the third tranche should be staked at the network genesis state.
- The network should incentivize its security with a reasonable inflation rate, say 7%, as fees will no longer be enough to pay for security without the swap fees.
Call to action
Why does this redistribution make sense? UST holders need to own a large share of the network, as the network’s debt holders they deserve to be compensated for the tokens they have been holding to the end.
Terra needs a community to continue to grow and make its blockspace valuable again – the only way to do this is to make sure that token holders before the attack commenced, the most loyal community members and builders, stick around to keep providing value.
It is a hard balance – and no easy answers in redistributing value within the network. But value must be distributed to allow the ecosystem to survive, and in its current state it will not.
The future of the Terra Network
The rallying cry for the Terra community has always been “a decentralized economy needs decentralized money”. This is an exciting vision, and while UST has not been successful the Terra community will find ways of iterating on the idea at some point in the future.
But the priority now should be to preserve this amazing ecosystem and to make as many users and builders as possible. Terra should first preserve its L1, and the community should gather to discuss decentralized money once the dust has settled.
I hope the community can achieve speedy consensus on how to revive the Terra ecosystem. I’ll always be here.