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TFL proposes contingency measures to counteract the recent collapse of the Terra ecosystem

Terra and its ecosystem have had a pretty rough ride the past few days. With UST losing its connection and LUNA in free fall, Terra is under pressure to quickly resolve the “bad debt” and restore the community’s confidence in itself.

The solutions proposed by TFL for Terra

According to a series of tweets shared by Terra’s official site, TFL has suggested the rest of the USTstablecoin– to burn reserves. More specifically, the team wants to burn a total of 371 million UST stablecoins that have been staked Ethereum as liquidity.

Just yesterday, Terra co-founder Do Kwon backed a similar proposal. The reasoning behind this was to burn UST, which will effectively mint more LUNA tokens than CryptoPotato explained earlier.

In theory, this would eventually restore UST to dollar parity. However, all of this would be at the expense of LUNA. The token would be massively diluted, likely hurting its already battered and battered price even more.

our recommendation TFL proposes contingency measures to counteract the recent collapse of the Terra ecosystem, Crypto Trading News

At the time of writing, LUNA was trading at $0.023 after falling a staggering 99.1% in the past day alone, data from CoinGecko shows. Just six days ago, the crypto asset was trading above the $80 mark. The fact that LUNA has an infinite supply doesn’t help either. Even if its price becomes more stable, it is likely to settle at lower levels than before, Kwon explained.

The last of the solutions proposed by TFL is the staking of 240 million LUNA tokens to strengthen the Terra Network against governance vulnerabilities.

It should be noted that the above contingency measures are now up for community voting. If they pull through, Terra will have burned about $1.4 billion, or about 11% of total supply.

Terra further noted:

“Recognizing the system’s bad debts with the above items should help bring on-chain swap spreads back to meaningful levels that significantly alleviate the binding pressure on UST.”

A different kind of stablecoin

Since its inception nearly two years ago, Terra has prided itself on the stablecoin’s unique algorithmic system as one that has been able to maintain the dollar peg without fiat collateral. Earlier this year, the network chose a different modus operandi – to launch its UST with Bitcoin (BTC) to secure.

Terra went on a bitcoin buying spree, with the latest purchase being $100 million worth of BTC — bringing his total holdings to over 42,000 BTC. However, the Luna Foundation Guard had to use this hideout in desperate attempts to save UST amid its recent demise.

At the time of writing, UST was trading at $0.48 and over 50% off what its stablecoin status requires.

Source: Crypto News Deutsch

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