Here’s how the Terra (LUNA) team will deal with the collapse of the stablecoin TerraUSD (UST)
Mr. Kwon proposed major changes to the LUNA/UST balance design in order to accelerate the process of “absorbing” TerraUSD (UST) stablecoins.
Increasing punching capacity would accelerate UST absorption: proposal
Kwon took to Twitter to share the details of Emergency Proposal 1164. It addresses the unparalleled unpegging of the stablecoin TerraUSD (UST), which is now available at a 57% “discount” from its planned peg at $1 equivalent.
According to him, there is no other way to stabilize the situation besides aggressively destroying the UST tokens that are leaving the market. This, in turn, will increase the UST price and make it closer to the regular 1:1 peg to USD.
As such, Do Kwon proposes to increase the “minting capacity” of the protocol from 293 million dollars to 1.2 billion dollars in equivalent: this will help to speed up the process of burning tokens.
Technically, the process seeks to adjust two parameters in Terra’s (LUNA) codebase, namely BasePool and PoolRecoveryBlock metrics.
At press time, 34.5% of LUNA enthusiasts voted for the proposal; almost everyone supported its implementation.
Terra’s tragedy looks like Lehman Brothers collapse, DeFi veteran says
As covered by U.Today previously, following the massive Bitcoin (BTC) collapse, investors started aggressively withdrawing their liquidity from UST and associated mechanisms. As a result, it lost its peg to the U.S. Dollar, while its underlying asset, Terra (LUNA), collapsed by 95%.
Meanwhile, one of the leading figureheads of SushiSwap (SUSHI) and Polygon’s chief information security officer, Mudit Gupta, compares this collapse to one of the bloodiest dramas in the financial markets:
I don’t think the crypto space has ever seen anything of this magnitude and severity before. Even the DAO hack feels nothing compared to the Terra crash. This is going to have long-lasting consequences. It’s bad for the whole space. (…) This feels very similar to Lehman Brothers situation in 2008 that caused a financial crisis. It didn’t matter if other companies were doing well or not. Everything tanked.
According to him, the crash of the second largest smart contract platform will not leave any crypto business unscathed.
