Terra, the disgraced public blockchain protocol that was singlehandedly responsible for emitting whale-sized volatility jitters earlier this month, plunging the entire crypto sphere into a full-fledged panic mode, is now betting its proverbial house on the "genesis of a new blockchain".
As per the tweet from Terra's official Twitter channel, the Terra ecosystem has voted to pass Proposal 1623:
1/ Terra 2.0 is coming.
With overwhelming support, the Terra ecosystem has voted to pass Proposal 1623, calling for the genesis of a new blockchain and the preservation of our community.— Terra 🌍 Powered by LUNA 🌕 (@terra_money) May 25, 2022
This proposal will effectively create a new blockchain sans the eviscerated stablecoin, TerraUSD (UST). The old chain will now be called Terra Classic and will feature its own native token, LUNC. On the other hand, the new chain will be called Terra and will feature LUNA as its native token.
The new Terra Core is currently scheduled to launch on the 27th of May. Crucially, the LUNA token will be airdropped to compensate for the losses incurred over the past few days according to the following schedule:
6/ Token distribution details can be found in the governance proposal, but to summarize:
● Community pool: 30%
● Pre-attack $LUNA holders: 35%
● Pre-attack aUST holders: 10%
● Post-attack $LUNA holders: 10%
● Post-attack $UST holders: 15%— Terra 🌍 Powered by LUNA 🌕 (@terra_money) May 25, 2022
Of course, the question remains without its algorithmic stablecoin, what purpose does Terra intend to serve in the broader crypto ecosystem?
As a refresher, Terra maintained UST's $1 peg by algorithmically adjusting the supply of UST and LUNA. If the price of UST fell below $1, the supply of UST was burnt by minting $1 worth of LUNA, entailing a swap fee that was paid in LUNA coin. This reduced UST's supply and allowed the peg to be restored. On the other hand, if the price of UST exceeded $1, LUNA was burnt to mint $1 worth of UST, entailing a swap fee paid in UST, thus increasing the stablecoin's supply and reducing its price. These swap fees played an important role in funding staking rewards. Moreover, the swap fee tolerance determined the amount of LUNA/UST that could be burnt or minted at a given time.
However, a few weeks back, Terra faced a concerted attack that quickly transformed into a hyperinflationary death spiral for the native LUNA coin that failed to restore UST's $1 peg, resulting in outsized losses for a large proportion of LUNA and UST holders.
Terra's LUNA coin is currently up over 17 percent on today's development. However, the coin is down a whopping 99.999 percent relative to its price of $87 toward the start of this year.
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