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The Terra governance system has voted to burn nearly 1.4 billion UST tokens from the project’s community pool and UST deployed for past liquidity incentives on Ethereum.
After the collapse of the Terra ecosystem earlier this month, the Terra governance system has initiated several measures. In the latest development, the Terra team has approved the plan to burn roughly 11% of the existing 11.2 billion UST supply.
Terra to Burn UST Tokens
Thus, 1.38 billion of the TerraUSD (UST) tokens will be burnt from the project community pool. Some tokens burnt will also be part of the UST deployed for past liquidity incentives on Ethereum. More than 99% of the people voting for the proposal have voted in favor of burning UST.
As per the details, this process shall happen in two phases. In the first phase, around 1 billion UST from the Terra community pool will move to the burn module. This move will permanently remove the UST from the total supply. Later, the team will manually bridge back 370 million UST from the Ethereum blockchain to Terra and destroy them. The official announcement notes:
“Eliminating a significant chunk of the excess UST supply at once will alleviate much of the peg pressure on UST. This is advantageous relative to the slow burn rate and type of downstream effects that inflated on-chain swap spreads induce on the Terra economy over an extended period”.
Earlier in May, Terra’s algorithmic stablecoin lost its UST peg and collapsed all the way from $1 to $0.04 in just a week’s time. With more than 90% correction, the fall has marked the total collapse of the UST stablecoin ecosystem.
Terra Blockchain Hardfork
The Terra team is planning for the re-birth of its blockchain via a fork later today. This time, the new Terra blockchain will completely abandon the UST stablecoin. In this proposal to abandon the UST stablecoin, Terra founder Do Kwon wrote:
“The distribution of UST has led to the development of one of the strongest developer ecosystems in crypto. The Terra ecosystem and its community are worth preserving. UST’s collapse “is Terra’s DAO hack moment – a chance to rise up anew from the ashes.”
Although the proposal has garnered a majority vote, many large LUNA holders seemed not satisfied with the decision.
“While it seems to be the most comprehensive proposal so far, we received very split opinions from the Orion community about it. “After long and hard consideration and due to such incomplete community feedback, Orion validator voted [to] Abstain,” said Terra blockchain validator Orion Money, having 10% of the total voting power.
Similarly, validator Smart Stake, the third-largest entity with 4% voting power has chosen to abstain “Terra 2 should be a pre-crash fork chain that has nothing to do with Terra 1, other than the chain state,” they wrote. “It needs new leaders with different points of view so that the chain can move in a different direction.”