The coin market was all abuzz with the implosion of the Terraform Labs’ TerraUSD (UST) stablecoin, which knocked off a huge chunk of the finances. What shocked the business world was not the downfall but how it happened and what it represents to the world.
UST – a token that uses algorithms instead of collaterals – was part of the decentralized finance experimentation project. As a stablecoin, UST uses algorithms to stabilize the monetary system. It was all well for the UST side until a large amount of it was sold.
Believed to be a ponzi scheme, the financial heads and traders are harrowing Do Kwon for the foolish sales. What followed later was the continuous price drops and UST at one point became less than a dollar.
The plunge of UST did not stop there, it also took down LUNA – its governance stablecoin – too. Further news reports prove the whole stablecoin field is being brought down along with it.
The meltdown following the downfall of TerraUSD has affected almost all the stablecoin fronts, bringing chaos across the boards. The trillion dollar stablecoin market lost a huge $300 Billion in one go. Most of the stablecoins wobbled at the same time, seeing a huge fall in price drops and frenzied selling at loss amidst the violent rumors.
While the volatility of the stablecoin is a concern, what remains to see is whether UST and LUNA will affect the rest of the similar coins.
The Revival Plan
After losing more than 80 percent of the market value, UST and its stabilizer LUNA, has plans for the revival as announced by Do Kwon, Founder of Terra. They are as follows.
The existing Terra Blockchain will be changed into a new one and be named Terra (LUNA), without the algorithmic UST stablecoin mechanism. UST stablecoin that crashed will be named Terra Classic (LUNC) and be replaced by the new one.
Free distribution of the new token will be handed out to those who pledge or stake the LUNA Classic tokens, along with residual USTs and other essential tokens.
Terra FormLab’s wallet address will be whitelisted from now on. Do Kwon wants to change the UST to a community-based blockchain till further notice.
Do Kwon has stipulated the number of new tokens to be at one billion for circulation. The exact distribution requirements will be based on conditions applicable to the industry, revenue, and community.
New Inflation Rates
It should be noted that the current revenue streams are insufficient for security of the stablecoin. Do Kwon plans to incentivize the network’s security in line with the native crypto token’s inflation, which is again based on the community interests and demands.
Terra’s Life Foundation Guard (LFG), had invested a huge $1.5 Billion to stabilize the implosion earlier. The failure was evident in days. The latest revival plans look good on the surface, but lacks certainty for now. The way this volatile market has been shifting to and fro in the past months makes the plans a little doubtful.
As an added security measure, various exchange markets around the globe have suspended the exchange and sales of UST and LUNA.