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Do Kwon proposes the revival of Terra, including a token redistribution plan

Terraform Labs co-founder Do Kwon has put forward a proposal to preserve the Terra ecosystem following the historic depegging of its algorithmic stablecoin UST and the resulting death spiral that plunged Terra (LUNA) tokens to virtually zero.

In a Friday post on Terra’s research forums, Kwon said, “The Terra community needs to restore the chain to preserve the community and developer ecosystem.” His suggestion, which was in response to validator groups that raised the possibility of a fork in the Terra chain includes compensating UST and LUNA holders who were unable or unwilling to sell their holdings during this week’s price drop.

Kwon suggested that validators should reset network ownership to 1 billion tokens distributed among LUNA and UST holders, as well as a community pool to fund future development. Specifically, 40% of the tokens re-distributed would go to LUNA holders who held the asset prior to the depegging event; 40% would be prorated to UST holders at the time of the new network upgrade; 10% would be allocated to LUNA owners just before the chain went out of business and the remaining 10% would go into the development pool.

Regarding UST’s repegging to the US dollar, Kwon said it probably wouldn’t make a difference given this week’s mass liquidity events in the Terra ecosystem. In other words, confidence in the stablecoin model has been permanently eroded. He explained:

“Even if the bond is eventually restored after the last few marginal buyers and sellers capitulate, Luna’s holders have been so severely liquidated and diluted that we will lack the ecosystem to rebuild from the ashes.”

At its peak in early April, LUNA’s market cap was over $41 billion, according to CoinMarketCap. The value of Terras UST, which can no longer be called a stablecoin, peaked at almost $19 billion. After losing parity with the dollar, UST plunged to lows of around $0.13 on Friday.

Although there is no way to fully restore the blockchain’s value, Kwon said the redistribution plan must compensate the network’s debt holders and “loyal community members and builders.”

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From top 10 crypto to trading for less than a fraction of a penny, LUNA’s price chart offers a stunning reminder of how quickly crypto markets can change. Source: CoinMarketCap

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Kwon’s proposal came about two days after UST released a plan to save the dollar peg, which included increasing the Special Drawing Rights pool and expanding the minting capacity of the protocol. The plan failed to win the favor of the so-called “LUNAtics” as the price of LUNA and its sister token continued to decline.