Breaking his long silence, the founder of Terra reveals how the network can still be saved
Do Kwon, the creator of Terra, has broken his longtime silence by releasing a new blog post in which he outlines the steps to bring the Terra ecosystem back to life.
Do Kwon admitted in the blog post that the community’s decentralized stablecoin, UST, has lost the trust of the community to continue playing the role of a decentralized coin for a decentralized ecosystem. Kwon made this admission because UST was hacked and his private keys were stolen.
The creator went on to say that the development of Terra used to be tied to the UST, but now, with the death of the currency, the community should focus on how the whole ecosystem can continue to thrive. develop in the future.
The founder revealed that at this point there are still several billion dollars of UST left, but the value of a Luna token has almost eroded. Even if the peg were to eventually be restored after the capitulation of the last marginal buyers and sellers, the Luna holders were so severely liquidated and diluted that we will lack the ecosystem to rebuild from the ashes. Even if the peg was eventually to be reinstated after the capitulation of the last marginal buyers and sellers. Even though a decentralized economy requires a decentralized currency, the UST is no longer able to perform this function since its users no longer trust it.
He also mentioned the future vision of a network as he said, The refrain “a decentralized economy requires decentralized money” has long served as a rallying cry for members of the Terra community. It’s an intriguing notion, and despite the fact that the UST fell short, the Terra community will discover methods to improve on the idea at some point in the not-too-distant future.
However, the main focus at this point should be to keep this incredible ecosystem alive while attracting as many users and creators as possible. The first thing Terra should do is protect its L1, and once the dust settles, the community should come together to talk about decentralized money.
“I am hopeful that the community will quickly come to a decision on how to bring the Terra ecosystem back to life. I will never leave this place.
Kwon suggests allocating 1 billion Terra Tokens to the project:
Kwon asserts that the Terra community needs to reestablish the chain and that validators should reset the network to one billion tokens, which would be distributed as follows:
- It is recommended that 400 million units of the token be distributed to former LUNA coin owners who have seen the value of their coins decrease significantly.
- On a pro rata basis, an additional 400 million units are to be distributed to UST holders.
- The remaining two hundred million units are to be split equally between the community pool, which would be used to support future initiatives, and those who purchased LUNA on the fly in an effort to help preserve the currency.
Kwon advised the community to make an effort to “encourage their security with a realistic inflation rate, say 7%,” as the fee will no longer be sufficient to pay for security without the exchange fee.
Stablecoin holders must own a substantial portion of the network since they were the holders of the network’s debt, the company’s creator said, explaining why he thinks UST holders should be hugely repaid and why he thinks that they should be immensely compensated.
Apart from that, he said that Terra needs its token holders before the onslaught starts to be active for the ecosystem to keep gaining value.
Let’s understand about tera:
An algorithmic stablecoin is a kind of cryptocurrency that automatically tracks the price of other currencies or assets. Terra is an algorithmic stablecoin payment mechanism that is built on the blockchain and is open source. Users can instantly spend, store, trade or exchange Terra stablecoins thanks to the blockchain technology behind Terra.
Stablecoins that are supposed to permanently reflect the price of a fiat currency can be generated using the Terra Protocol (a government-backed currency like the US Dollar or Euro). Terra and Luna are the names of the two cryptocurrency tokens that make up the system.
A blockchain serves as the basis for the payment system known as Terra, which also exists on the blockchain. Terraform Labs, located in South Korea and created in 2018 by Do Kwon and Daniel Shin, is the company responsible for its development. Do Kwon has worked for Microsoft and Apple in the past, and he is also the founder of start-up Anyfi, which provides solutions for decentralized wireless mesh networks. In addition to being a co-founder of Korean e-commerce company TMON, better known as Ticket Monster, Shin is the current founder and CEO of Asian payment technology company Chai, which is a partner of Earth.
In a white paper published in April 2019, Do Kwon is listed as one of four co-authors. This article provides an explanation of the business rationale for the development of Terra. The article makes a proposal for a cryptocurrency that would be known as Terra which would be:
- Stable prices while being driven by growth.
- According to the theory, a cryptocurrency with a stable price would include the most advantageous aspects of traditional currencies and Bitcoin (BTC).
- To become a viable medium of exchange, a brand new digital currency must gain widespread acceptance before it can be considered a success.
According to the findings of the study, there is a need for a price-stable decentralized currency protocol in the fiat and blockchain economies. If cryptocurrencies were used for this purpose, this would be the optimal use case for cryptocurrencies.
Terra has 114 projects that span decentralized finance (DeFi), Web 3.0, and non-fungible tokens as part of its developing cryptocurrency ecosystem. It is part of Terra’s mission to become a leading e-commerce stablecoin and decentralized finance (DeFi) (NFT) payment service provider. These projects consist of the following:
- A platform with a fixed return that also offers borrowing rates and frictionless access is known as Anchor Protocol.
- The Chai app is a South Korean payment system with over 2 million users.
- LoTerra is a blockchain-based decentralized lottery platform that was created on top of the Terra network.
- Mirror Protocol: This protocol allows for the development of fungible assets, sometimes referred to as “synthetic”, that mirror real-world asset prices.
- Talis Protocol is a marketplace for artists, where they can showcase their talents and sell their products.
- A platform for mining and trading derivatives is known as the Vega Protocol.
Now let’s move on to Tera & Luna:
The primary value of stablecoins is derived from the stability of the price peg, which theoretically bypasses the volatility typical of cryptocurrencies. The Terra Protocol works to maintain the price of the Terra stablecoin by ensuring that supply and demand are always balanced through the use of arbitrage. This is accomplished by ensuring that supply and demand are always in balance.
These are stablecoins, and they are called fiat currencies because they reflect the price of these currencies. For example, the price of the basic Terra stablecoin, which corresponds to the price of special drawing rights issued by the International Monetary Fund and is called SDT or TerraSDR respectively. Other currencies on the Terra stablecoin include TerraUSD (UST), which is pegged to the value of the US dollar, and TerraKRW (KRT), which is pegged to the value of the South Korean won. Burning Luna allows users to generate new Terra.
The stablecoin Terra is balanced by Luna, which acts as a variable counterbalance and absorbs the volatility of the coin. Imagine the entire “economy” of Terra as being made up of a Terra pool and a Luna pool. These pools are used to modify the price through the use of incentives for network users. This will help you understand how Terra works.
Luna is the staking token of the Terra system and is used for governance as well as mining. It is also responsible for absorbing the price fluctuation of the Terra stablecoins. Users place bets on blockchain miners, often referred to as “validators,” who are responsible for recording and verifying transactions on the blockchain and are compensated through incentives derived from transaction fees. Users stake Luna to Terra. Luna’s value increases in proportion to the increasing use of Terra.
Expansion (of the Terra pool)
It can be inferred that there is greater demand for the stablecoin than there is supply when Terra is trading at a relatively high price relative to its peg. For this reason, Terra’s supply needs to be strengthened so that it can meet demand. The protocol tricks users into hitting Terra and burning Luna, which has the effect of lowering Terra’s price (due to an increase in supply) while simultaneously increasing Luna’s price (by reducing its supply ). Users will continue this arbitrage process until Terra’s price trades at its expected peg level.
“to contract” (from Terra Pool)
When the price of Terra is trading low against its peg, it indicates that there is a supply of the stablecoin greater than its demand. To better align Terra’s supply with demand, the network will have to reduce its production. The protocol therefore incentivizes users to burn Terra and mint Luna, which has the effect of increasing the price of Terra (since there is less supply) while simultaneously decreasing the price of Luna (by increasing its supply) . Users will continue to engage in this arbitrage process until Terra trades at their desired price.
Key points to remember:
- Terra is a blockchain system that is open-source and serves as the basis for algorithmic stablecoins as well as a network of financial applications.
- The second main cryptocurrency token that works on this protocol is called Luna, and Terra is one of the two main tokens that work on it.
- Luna-denominated stablecoins are used for blockchain governance, while Terra-denominated stablecoins monitor the price of fiat currencies such as the US dollar and Euro.
- The price of the Terra stablecoin is kept stable by the Terra protocol, which ensures that the supply and demand for the coin are always in a perfect state of balance. The Luna cryptocurrency is used as a variable counterbalance to the Terra stablecoin in order to achieve this goal.