According to Terra’s official statement, more than 79% of its members have approved Do Kwon’s initiative to implement the network’s revival plan of Terra chain without the use of the algorithmic stablecoin.
Decisions Made by Terra Network’s Members
Facing the collapse of Terra’s ecosystem, including its stablecoin UST and native token LUNA, Do Kwon has introduced a new plan aimed at restoring the fully-functional blockchain with some significant changes. In this manner, the network’s founder aims to address the existing limitations and contribute to the development of a more sustainable system that will prevent the occurrence of similar problems in the future. According to Terra Station, 79.57% of all members have approved the rebirth initiative. The new token will be airdropped across UST holders, Luna Classic stakers, and developers.
Terra will be transformed into a community-owned chain, thus delegating the maximum decision-making power to its community members. In this manner, Do Kwon tries to distance himself from the project and address the current criticism associated with the excessive concentration of power and centralization of Terra Network. As the major aspect of criticism regarding the utilization of the algorithmic stablecoin is also addressed, the reformed blockchain is supposed to be much more stable and sustainable. Despite the extensive debates initiated by community members during the past couple of days, the vast majority of stakeholders have approved the current initiative as it provides the only opportunity for restoring the blockchain functionality within the minimum timeframe.
Key Elements of the Initiative
The analyzed initiative as presented by Do Kwon has the following major elements. First, the new system will not use any algorithmic stablecoins to minimize any risks to its sustainability. The old chain will be called Terra Classic, and the new one will be called Terra with their respective tokens LUNC and LUNA. Second, the airdrop will be used for completing the initial distribution of new LUNA tokens, targeting the essential Luna Classic’s developers, stakers, and Luna Classic holders. Third, TFL’s wallet will be removed in order to transform Terra into a fully community-owned network.
Fourth, a considerable portion of the token distribution will be allocated to emergence runaway for the existing dApp developers. Moreover, the document declares the intention to integrate the interests of developers with the long-term success of the entire ecosystem. However, the relevant details of this initiative’s implementation are not outlined. Fifth, token inflation is expected to be used for creating additional incentives for network security. The new plan states that the target staking rewards will be about 7% per year. Compared to LUNA’s earlier staking rewards of 19.5% at Anchor Protocol, the new initiative may contribute to the emergence of a more sustainable system.
The following token distribution will be realized according to the recently approved rebirth plan. The community pool will constitute 25%, and it should be controlled by staked governance to prevent the excessive concentration of power. The pre-attack LUNA holders will receive 35%, and additional derivatives will be used depending on the balance of LUNA held by such addresses. The pre-attack aUST holders and post-attack LUNA holders will receive 10% each. Finally, 20% will be allocated to post-attack UST holders. Do Kwon suggests that such distribution will allow preventing any potential conflict of interests and contribute to the system’s sustainability.
Terra’s Revival Plan: Pros and Cons
Terra’s complete collapse has revealed the major drawbacks of its approach to blockchain, governance, and tokens’ supply issues. The presented plan addresses some but not all problems. On the positive side, community governance and the absence of algorithmic stablecoins should contribute to the higher sustainability of the network with the minimization of risks observed in the past. Moderate staking rewards can prevent the emergence of manipulative operations and disproportional funds allocation.
On the negative side, Terra still lacks innovations that may positively distinguish it from the main competitors. Despite Do Kwon’s claims, a specific algorithm that may be used for maintaining the stability of the system and the balance of interests remains unclear. The risks of the excessive focus on short-term gains over long-term sustainability remain significant. Finally, the major problem refers to Terra’s damaged reputation, and most investors will abstain from investing in this project. Although the new plan may slightly improve Terra’s position in the industry, there are no signs of it being able to fully restore its potential or become close to Top-10 altcoins by market capitalization.