At the time of the depegging, Luna was trading at a $38B marketcap, and UST had a $18B marketcap.
When UST depegged, if Luna had been designed to protect Luna instead of UST, it would’ve required a 50-60% dilution of Luna (at its then marketcap) to buy up ALL of UST marketcap instead of the 10000% hyperinflation we are currently witnessing.
obv. oversimplifying but what do you all think?
Luna’s value proposition is coupled to it’s role in maintaining the UST peg. Without UST, Luna has no justification for its existence around which hype can be manufactured.
It’s not too late to save LUNA.
First, halt UST.
Then, uncentivize LUNA buys with UST airdrops from the 1.3 billion UST that was proposed to be burned. Lock the UST airdrops for six months which is about how long this will take to rebuild.
Once liquidity enters and stabilizes LUNA, burning LUNA can commence and only then re-peg UST.
You basically have to reverse the UST dump back on LUNA.
Luna can still be used to maintain the peg in this scenario… but what if LFG was created to save Luna instead, which would save UST indirectly
The value of LUNA is actually irrelevant to its function of maintaining the UST peg. All that matters is that it can be used to arbitrage the difference between the peg and de-pegged value of UST. With a high enough reserve of UST held by an ‘attacker’, a higher value of LUNA makes no difference to the ability to maintain the attack. What it does mean is that there is simply more for the attacker to take out of LUNA.
So, as long as UST is de-pegged (with an ‘attacker’ holding a Sufficiently high amount of UST), LUNA is doomed to supply inflation and therefore value depreciation. Resetting the volume of LUNA as suggested by the proposal won’t fix this.
Marketcaps are fugazzi, Luna went to 0 the moment faith was lost in the peg simples as that, took a while for the charts to show that’s all. This was probably the biggest flaw of the design, it required a degree of faith in the peg which so many lost because they had no understanding of the mechanics, nor should they have.
If everyone decided they want out of BTC, you won’t get 55T USD out, you’d get far less, 10T if you’re lucky, the moment no one wants to buy the value disappears.That’s what the reserves were for, to have an interested buyer at all times but it wasn’t enough…
Saving Luna was never an option imo, we did what we could with what we had, I still hope to see a new mechanism being proposed, one that requires less trust in the peg.