Algorithmic stablecoin Terra USD (UST), which lost its peg to the dollar with the collapse in the cryptocurrency market, failed to recover and dragged LUNA, the governance token of the project to which it is one-to-one. After yesterday’s Terra network update, Blockchain was reactivated and some changes were made. Today, Terra founder Do Kwon made some statements regarding new developments.
Terra Blockchain, reactivated after the update
As we have mentioned in the news of Kriptokoin.com, the Terra team announced yesterday that the Blockchain has restarted block production after the Blockchain was shut down. However, the team noted that on-chain swaps of validators have been disabled and IBC channels are now closed.
Also, the team says that off-chain assets like bETH will be tied to their native Blockchain. In the first statement, the team announced that the wormhole bridge is now active with an update after stating that the wormhole bridge is out of use.
Terra Blockchain has resumed block production. Validators have decided to disable on-chain swaps and IBC channels are now closed. Users will be encouraged to link off-chain assets such as bETH to their own Blockchain.
LUNA and UST still in death’s sleep
In the process, LUNA and UST were reset, losing almost all of their value. Although the team and the founder of the project, Do Kwon, tried to calm the angry investors and re-accelerate the project, unfortunately, they were not successful. At first, the LUNA Foundation offered to lend Bitcoin (BTC) to the market as a solution. However, Do Kwon canceled this plan and argued that increasing the supply of UST by staking and burning overprinted LUNAs would work.
However, the LUNA did not regain its dollar peg as it did not burn. After that, the governance token LUNA, which is tied to UST, could not hold even below $1 and its value became almost zero. Considering that this situation would harm the stock markets, crypto money exchanges such as Binance and CryptoCom preferred to close their exchanges to LUNA transactions, arguing that the increasing number of LUNA, which is not in circulation, poses a risk.
LUNA investors are hopeful that Terra will reactivate their network, but this doesn’t make sense to them as the LUNA burns have yet to take place and the UST constant has not been achieved. At the time of writing, the LUNA price did not seem to react to this development and the UST was still around $0.16. It appears that fixing will be difficult or not at all.
New comments from Terra founder Do Kwon
There have been some developments in the last hours regarding the Terra UST and LUNA collapse. The founder of the project, Do Kwon, made some statements in the evening. According to the statement, Terra community members and validators are working on a fork to resolve the UST lost peg issue. Do Kwon, the name at the center of the reactions, also pointed out the loss of trust, using the following statements:
Luna’s owners were so severely liquidated and reduced that even if peg was eventually reinstated after the last marginal buyers and sellers surrendered. which we will be deprived of the ecosystem to be rebuilt from the ashes. While a decentralized economy needs decentralized money, UST has lost too much confidence in its users to play the role.
“So what’s left?” Asks Do Kwon, admitting that after this time, investors cannot trust the project. The Terra founder, after talking about the establishment of the ecosystem, his achievements, says that Blockchain needs to be rebuilt to protect the ecosystem. In this context, Do Kwon first talks about a distribution as a solution:
- 400 million (40%)
- to LUNA holders before losing 1 dollar fixed on UST 400 million (40%)
- to UST holders pro rata during upgrade, 100 million (10%)
- to LUNA holders at the last moment of blockchain shutdown, 100 million to Community Pool to fund future development million (10%)
After that, the network will fork and old tokens will be trashed. However, in order to benefit from the mentioned distribution, those who meet the conditions must keep their tokens in their wallets. Time will tell if this solution will work.
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