While the fork of the Terra blockchain (LUNA) will take place tomorrow around 4am, a proposal to burn the USTs of the community pool has been widely accepted via a participatory vote. More than 1 billion USTs will be deleted, which is 11% of the total number of tokens in circulation. The community hopes to revive the stablecoin price as much as possible.
Over a billion USTs soon to be burned on Terra
In an attempt to revive the UST’s peg to its $1 price, the Terra staker community has overwhelmingly voted to burn over 1 billion USTs.
Initially, a vote was launched on this subject on May 12, the day after a tweet from Do Kwon who had mentioned the need for the re-peg of the UST:
“First and foremost, the only way to move forward will be to absorb the supply of stablecoins that want to get out before $UST can start rebooting. There’s no way around that.”
A decision was supposed to be made within 7 days following the proposal, but the proposal was crippled due to the community pool-based voting system, which was being used for another vote already in progress.
A new voting proposal was thus set up on May 20th, still based on the same LUNA token burn plan.
In the meantime, network validators and LUNA holders have voted to fork the blockchain early tomorrow morning in an attempt to rebuild Terra on a new architecture without UST.
But the burn of LUNA tokens will still be done despite the fork. Thus, this will have the effect of relieving the pressure on the UST due to the far too large number of tokens in circulation, over 11 billion at the time of writing, even though a “new” blockchain will be deployed in parallel.
Details and consequences of the burn
The burn process will be deployed through 2 phases. In the first phase, more than 1.3 billion USTs will be sent to a dedicated burn address. Then, 371 million additional USTs from the bridge-chain will also be burned to further relieve the pressure.
In parallel to this burn, which is therefore taking place directly within the Terra blockchain through the initiative of its own community, the MEXC exchange indicated yesterday, Thursday 26 May, that it would send all LUNA tokens from its platform’s transaction fees to Terra’s burn address.
This decision was also made following a community vote on the exchange, with over 98% of votes in favor of the burn. This plan will run for 1 month, from May 26 to June 26.
Interestingly, the community has long seemed to favor a massive burn of tokens in an attempt to return Terra’s 2 assets to normal. Do Kwon, on the contrary, indicated 2 days after giving the dedicated burn address that sending tokens on it was not a good idea, and that he was giving it for information purposes only:
“To clarify, as I’ve noted several times, I don’t think sending tokens to this address to burn is a good idea – nothing will happen, other than you will lose your tokens. I don’t want there to be any confusion.”
In any case, the blockchain as we know it will operate its fork around 4am tomorrow, Saturday, May 28. The future of Terra therefore still seems uncertain, both in terms of developers who are paralyzed because of the fork and in terms of the community that still seems to prefer a massive burn.
