All this doom and gloom! Why are we giving up so easily?
It’s gonna be okay folks. Though I admit I still have yet to recover from the shock of losing 80% of my net-worth from ATH in the course of a week.
I think that the promises of UST were oversold. UST was never meant to maintain its peg at all times and under all circumstances. UST holders did not understand the risks of a major contraction.
An algorithmic stable coin does not present the same risk profile as holding a physical US dollar or even another centralized-collateralized stable coin like USDC or USDT. However, this doesn’t mean that UST is useless in its current form and can’t continue to be improved upon. UST is a different sort of asset class and should be treated as such.
All of that said, this contraction is still primarily a crisis of confidence, so what can be done to restore confidence.
Firstly, I have very little faith in the community’s ability to coalesce around a forked solution. Too many competing interests and too much complexity to engineer a viable solution.
Furthermore, I believe that a forked solution won’t instill confidence because it basically admits we all got the fundamentals wrong. I still believe that UST can achieve an equilibrium with LUNA and a term that I would like to borrow from the software world of “eventual consistency” with the US dollar.
This process will be painful no doubt and will force many UST holders to take a significant haircut in the short-term. LUNA holders have, are, and will continue to suffer the pain of this contraction.
UST cannot function without latent speculative demand from LUNA. This past week has convinced me that such demand still exists. And that’s even with A SUPPLY OF 6.5 TRILLION! 
What we can’t do is continue to print LUNA. That action will destroy any latent speculative demand, and it was a terrible idea to try and open the printers to solve this crisis. That idea was never going to work and smacked of desperation.
We can put a hard cap on LUNA supply around 100 billion and not allow any LUNA to be created when supply passes that hard cap.
This means we admit that we cannot recover UST peg in the short term. But I think we are all in agreement on that point anyways.
What this hard cap might do is increase the confidence of speculators to purchase and hold LUNA which may very well accelerate the recovery of UST. The hope is that the existing supply of LUNA will eventually contract towards the 100 billion and then normal operations can resume. Until that happens. UST will continue to depeg and contract in market cap.
TFL shut off the network partially because of fear of governance attacks, but I say let the free market do its thing. LUNA became worthless primarily because of LFG and TFL inaction during this crisis so if someone else wants to come along and buy up all our LUNA for some other objective that’s fine by me.
Cheers up folks.
People have short-term memories, and though UST and LUNA may have suffered a very serious setback, I believe UST can survive and that’s even with the public possessing a much more realistic understanding of its risk profile.
The benefits of scalability and decentralization remain. Also, we can continue to learn and improve based on our experience here. For example, need more BTC to backstop UST at a higher ratio going forward!
Once the new equilibrium is reached I would recommend focusing on stability vs subsidizing anchor’s yield for growth.
Long live UST!