The Terra ecosystem’s notorious leader is trying to salvage the resources and talent left behind in the wreckage that is UST’s depegging.
Do Kwon, the maligned founder and CEO of TerraForm Labs, has posted a plan to fork the Terra blockchain and distribute 1B of a new token to stakeholders in the Terra ecosystem. Kwon proposes salvaging Terra’s developer ecosystem, users and recognizable brand by launching a new Layer 1 blockchain, while putting the idea of creating a decentralized stablecoin on hold for the time being.
“While a decentralized economy does need decentralized money, UST has lost too much trust with its users to play the role,” Kwon wrote. “So what remains? While UST has been the central narrative of Terra’s growth story over the last year, the Terra ecosystem and its community is what is worth preserving.”
Under Kwon’s plan, 40% would go to LUNA holders before the depegging event, and 10% to LUNA holders “at the final moment of the chain halt.” Another 40% of the proposed token would go pro-rata to holders of the UST stablecoin “at the time of the new network upgrade.” The final 10% would go to a Community Pool to fund future development.
“Terra needs a community to continue to grow and make its blockspace valuable again,” wrote Kwon. “The only way to do this is to make sure that token holders before the attack commenced, the most loyal community members and builders, stick around to keep providing value.”
The new Terra blockchain’s native-token would be staked, with a “reasonable” inflation rate of around 7% to incentivize participation in the network, Kwon proposed.
The reception for his plan has been subdued, as could be expected from an ecosystem that has been cut off at its knees.
Luna Foundation’s BTC Reserves
A major question remaining is what happened to the Luna Foundation Guard’s (LFG’s) BTC which was supposed to be used as a backstop for UST.
One of the most liked comments to the proposal comes from a user with the online name of FatMan, who asked, “most importantly: where are the LFG bitcoins? How many are left? What happened to the market maker loan deal?”
Other prominent names like DCinvestor and Messari founder Ryan Selkis, have joined in the chorus asking for information on LFG’s BTC.
LFG was founded in January with the basic mandate of supporting the Terra ecosystem. In March, the organization sold LUNA tokens for $1B of BTC, which were supposed to be used as a backstop for UST by buying the stablecoin if it falls below the peg.
LFG continued to buy BTC, reaching a total of $3.5B worth on May 5, according to a press release, which also said the organization was among the top 10 holders of the digital asset at the time.
The wallet address that LFG last posted on May 9 is empty.
“Similiar to the last deployment, it has been loaned to market makers,” the organization said of the “last clip” of 37,000 BTC. The organization posted on May 8 that it loaned $750M of BTC to protect the peg, but details are scarce about the loan and the “last clip” of BTC, leading to the current state of doubt.
Other common questions of the revival plan are about people who held LUNA on CEXs — the basic issue there is that CEXs would need to be responsible for redistributing the new tokens to their users as Terra presumably doesn’t have access to individuals’ wallet addresses.
And still others users argue the proposed distribution favors people who supported the ecosystem before UST depegging, rather than those who bought in afterwards in support of the ecosystem.
In all, there’s not much goodwill to go around — while Kwon says that the developer ecosystem is worth supporting (presumably builders held significant amounts of LUNA and UST as well), it’s not clear whether another chain will have any demand, especially without a stablecoin at its center.