After the huge loss investors experienced when the supply-demand ratio of the algorithmically built stablecoins failed, major crypto exchanges, including Binance and Coinbase, blocked Terra-Luna coins. Do Kwon, Terra Labs’ CEO and co-founder, has finally spoken out about the Terra-Luna stablecoins’ crash. The CEO is on the lookout for a solution to bring the Terra environment back to life. Terra LUNA: Hard Fork is the name of this strategy.
Notably, this is the second revival plan that the company CEO has come up with. In the first proposal on May 14, Kwon proposed abandoning the Terra stable coin and redistributing Luna tokens amongst the community members, but that did not work out. However, it seems that Kwon is not ready to give up on Luna-Terra yet.
The founder will apparently solve design flaws in the Terra ecosystem. A hard fork means validating all invalid blocks as well as transactions on the blockchain network. But, how will this help?
The new plan will ensure that Terra is not linked to the current Terra blockchain, instead will be linked to a new blockchain, then the Terra token can be switched to TerraClassic, the stablecoin by Terraform labs that is not algorithmically designed.
The proposal to save the Terra coin includes redistributing tokens to move forward. “The holders of Luna have so severely been liquidated and diluted that we will lack the ecosystem to build back up from the ashes,” Kwon wrote on the Terra research forum. “While a decentralised economy does need decentralised money, Terra has lost too much trust with its users to play the role.”
It should be emphasised that Terra and Luna are sister coins, and in order to keep the balance between them, users had to acquire Terra and then swap it for Luna, earning tiny gains. After both coins crashed due to a supply-demand imbalance, the only option to save them is to redistribute them.
Kwon has recommended resetting the distribution of the network’s Luna tokens to 1 billion in order to “preserve the community and the developer environment,” with 40 million of those tokens being reallocated to holders before Terra was de-pegged from the US dollar over the weekend.
Another 40 million will go to those investors who hold Terra at the time of the hard fork upgrade. A 10 million would go to Luna holders when the blockchain was halted today for a second time in 24 hours. The remaining 10 million would be used to pay for the future development of the network.
Meanwhile, the hard fork technique is not endorsed by Binance CEO Chengpeng Zhao. He suggested that investors should rather burn the token. Burning refers to a process of sending crypto to a ‘dead wallet’, from where the tokens can never be retrieved. This could help balance the supply of the currency.
Whenever the supply of tokens drops, inflation drops too. This can help Terraform Labs recover their token. While Kwon does not believe in burning the coins, however, at the request of community members, the CEO went against his initial ‘hard fork’ plan and publicly shared a burn address for Luna.
Every Luna token sent to this address will be burned immediately, effectively reducing the circulating supply of Luna tokens. Currently, the Luna supply is 6.1 trillion, obscenely more than that of Terra which is only 1 billion.
Kwon explained after revealing the Luna burn URL that it was only supplied with people for informational purposes and recommended against utilising it. “Happy to share for information purposes,” he said, “but want to highlight that you should not burn tokens unless you know what you’re doing — I, for one, have no idea.”
Terraform Labs currently has no solid plans to resolve the Luna-Tera issue. Investors will have to wait a little longer to discover what the future holds.