The Luna blockchain found itself in hot water last week following the crash of its LUNA token, which powers the Terra ecosystem. A combination of market volatility, low liquidity, and loopholes within the protocol led to the token crashing almost 100%, leaving the network open to all forms of attack. Terra later announced that it had temporarily paused transactions to prevent a governance attack.
LUNA’s decline was beyond surprising. As of last week, the token fell to less than a penny. This came a week after it traded for about $80 just 2 weeks earlier. There have been several conversations on the network’s future and how Terra plans to navigate itself out of this storm. Do Kwon, Luna’s co-founder announced a plan to revive the ecosystem.
Do Kwon Proposes a Blockchain Hard Fork to Revive Terra
In a series of tweets he shared on Monday, Do Kwon proposed a governance proposal to fork Terra into a new chain. However, this would be without the algorithmic stablecoin. This would mean getting rid of the troubled TerraUSD (UST) and giving the network a fresh start as a new project. Kwon proposed that the project would revamp under the name “Terra” while the old, failed project would become “TerraClassic” and would exist alongside the TerraUSD and the token Luna Classic.
Kwon wrote in a tweet, ” The Terra chain as it currently exists should be forked into a new chain without algorithmic stablecoins called “Terra” (token Luna – $LUNA), and the old chain be called “Terra Classic” (token Luna Classic – $LUNC). Both chains will coexist.”
More on the Proposal
Continuing his agenda, Kwon stated that he plans to distribute new tokens to former Terra loyalists such as major app developers, holders of the TerraUSD, and people whose systems aid transactions on the network. The envisaged new LUNA supply will have a 1 billion cap. So, 25% will go to the community pool, while 5% will be given to top developers. Finally, LUNC and UST holders will receive 70% if everything goes as planned. Based on Kwon’s calculations, if approved, the new chain will go live on May 27.
According to the outspoken Kwon, the Terraform Labs’ wallet will not be part of the airdrop. This would make Terra a fully community-owned chain. Going further in his proposal, Kwon wrote, ” We believe this token distribution, in addition to best efforts by LFG to make $UST holders whole, best solves for the varying interests and time preferences for each stakeholder group, and most importantly, creates the most viable path to revive the Terra ecosystem.”
The Terra ecosystem has been in the hot seat to set things in order. Terra claimed that it had spent the bulk of its 80,000 BTC in its reserves trying to restore UST to its peg. The platform noted that it had about 313 bitcoin left. Meanwhile, the Luna Foundation Guard said it had over $300 million worth of cryptocurrency which it intends to use in the settlement of key members of the network.
What do People Think About This Proposal?
This proposal is Kwon’s second attempt to bring the Terra network back to life. It has been a difficult few days for stakeholders who suffered losses when TerraUSD went downhill. So, Kwon’s proposal was met with mixed reactions. Other industry leaders, such as Binance CEO Changpeng Zhao, have expressed dissatisfaction with the plans to fork the blockchain.
10/ Call to action: we encourage Terra developers to signal support & commit to build on the fork on public channels ASAP.
— Do Kwon 🌕 (@stablekwon) May 16, 2022
Taking to his Twitter, Zhao wrote, ” This won’t work. Forking does not give the new fork any value. That’s wishful thinking. One cannot void all transactions after an old snapshot, both on-chain, and off-chain (exchanges). Where is all the BTC that was supposed to be used as reserves? “
Personal opinion. NFA.
This won't work.
– forking does not give the new fork any value. That's wishful thinking.
– one cannot void all transactions after an old snapshot, both on-chain and off-chain (exchanges).
Where is all the BTC that was supposed to be used as reserves? https://t.co/9pvLOTlCYf
— CZ 🔶 Binance (@cz_binance) May 14, 2022
Furthermore, a user who was far from impressed with this proposal wrote, ” In their desperate attempt to bring some value back, this snapshot idea is coined. But the reality is that this doesn’t solve anything, it’s a fluke even if they go by it”
In their desperate attempt to bring some value back, this snapshot idea is coined. But reality is that this doesn’t solve anything, it’s a fluke even if they go by it
— Abdul Rafay (@ARafayGadit) May 14, 2022
Billy Markus, the creator of Dogecoin, wrote, ” the only way it works is for a massive amount of even stupider people want to throw their money in a dumpster fire to save one of the dumbest things to ever happen in crypto.”
oh wow. impressed.
just to +1, the plan is actually fucking stupid, the only way it works is for a massive amount of even stupider people want to throw their money in a dumpster fire to save one of the dumbest things to ever happen in crypto
— Shibetoshi Nakamoto (@BillyM2k) May 14, 2022
Markus went further to ask Binance not to list the anticipated Terra as he believes it is a doomed project,
binance also made a ton of money from people throwing their money into this dumpster fire, if it also wants to help.
not listing the new project would be a step if it wants to protect investors.
— Shibetoshi Nakamoto (@BillyM2k) May 14, 2022
Some others believed that the next reasonable step would be to burn rather than a fork. One person wrote, ” Everyone wondering why fork and not burn, would you want to move into a house rebuilt after house that burnt down and killed people or move into a new house that has no history or tarnish.”
Everyone wondering why fork and not burn, would you want to move into a house rebuilt after house that burnt down and killed people or move into a new house that has no history or tarnish.
— Leaky Wallet 🌐 A real Icon (@BtcStonks) May 16, 2022
Some Validators Side with Terra
Despite the many people that believe this proposal is a failed idea, several validators threw their weight behind Kwon. Chainlayer, a decentralized oracle network, pledged to validate on the new network. They wrote, ” Chainlayer commits to validating on the new Terra network!”
Chainlayer commits to validating on the new Terra network!
— ChainLayer (@chainlayerio) May 17, 2022
BTC Secure also noted that it would support the launch of the new Terra and ensure the reliability of consensus as a validator. Sigma Finance has also expressed interest in validating the new Terra alongside Terra Bay and Nebula Protocol.
Stader Labs highlighted the importance of moving forward and preserving the Terra community in the face of this hardship. As a result, Stader believes the proposal is a step in the right direction and would fully support it.
Thorchain.Bull claimed it would validate on both chains as it looked forward to seeing this pick-up. Others, such as Valkyrie, Smart Stake, and Random Earth, pledged their full support to the proposed plan. Furthermore, SCV Security will serve as a validator and security provider for the new Terra.
The Advantages and Disadvantages of the Fork
Kwon’s plans to hard fork the blockchain come with a series of advantages as well as disadvantages. Forks usually occur for several reasons. Sometimes, it could be to fix issues found in the older versions. At other times, it could be to reverse transactions or add new functionality. Let’s look at the advantages of this proposal:
- When there is a hard fork, the community will profit from the formation of a new asset as a result of the fork. Terra’s users will benefit from the airdrop. The free coins will help balance the current situation.
- Successful forks help solve existing problems. This would look as though nothing happened.
What are the disadvantages?
- This fork could cause high volatility.
- A hard fork frequently causes a deep divide in the digital asset community.
- People who purchased the tokens after the crisis would lose their funds.
The Terra community will hold a governance vote on May 18 to decide the next step with this proposal. As of this writing, Luna trades at $0.000176. It has a 24-hour trading volume of $2,647,489,473.
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