Crypto exchanges Binance, KuCoin, Nexo, WazirX, CoinDCX, have blacklisted Terra-Luna coins after investors suffered staggering losses due to the collapse of algorithmically designed stablecoin’s supply-demand ratio. Terra Labs co-founder and CEO, Do Kwon, has finally spoken on the collapse of Terra-Luna stablecoins.The CEO is seeking to revive Terra’s ecosystem from its current state.The revival plan is called Terra LUNA: Hard Fork.
It is worth noting that this is the CEO’s second revival plan. On May 14, in his first proposal Kwon recommended eliminating 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.
Terra’s founder is reportedly going to fix design flaws in the 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 noted that Terra-Luna coins are sister coins and to maintain the balance between them, users had to buy some Terra and then exchange it instead of Luna, for which they would earn small profits. With both coins crashing, after the supply-demand ratio broke, the only way to revive the coins is re-distribution.
To “preserve the community and the developer ecosystem,” Kwon has proposed resetting the distribution of the network’s Luna tokens to 1 billion, 40 million of which would be redistributed to holders before Terra became 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.
Why Binance CEO Recomments Luna Burn?
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.
After sharing the Luna burn address, Kwon clarified that the burn address was shared with users only for information purposes and warned against using it.“Happy to provide for information purposes but want to clarify that you should not burn tokens unless you know what you are doing – I for one cannot understand,” he weote.
Currently, Terraform Labs does not have any concrete plan to fix the Luna-Tera crisis. It looks like investors will have to wait more and see what the future lies for them.
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