The UST stablecoin fell below the expected value of $ 1 in May, causing panic in the cryptocurrency market.
Gabby Jones | Bloomberg | Getty Images
Terra backers have approved a plan to revive the failed cryptocurrency venture, without the controversial stablecoin that helped trigger its staggering demise two weeks ago.
“With overwhelming support, the Earth ecosystem has voted to pass Proposition 1623, calling for the genesis of a new blockchain and the preservation of our community,” Terra’s official Twitter account published Wednesday.
The proposal would lead to the creation of a new blockchain, a shared ledger of transactions, and its associates moon token, which is now useless after investors fled en masse in the cryptocurrency equivalent of a run to the bank.
Earlier this month, landUSDa so-called stablecoin, plunged below the expected peg of $ 1. This led to panic in the cryptocurrency market, with investors downloading its twin token, luna.
TerraUSD, or UST, is what is known as an “algorithmic” stablecoin. Through complex engineering, it was designed to maintain its dollar value through the creation and destruction of the UST and the moon, which, in theory, would help balance supply and demand.
It differs from the number of major stablecoins, such as bind Other USDCthey are intended to operate, as in an actual fiat currency held in a reserve to support the dollar peg in case clients withdraw their funds.
At their peak, the moon and UST had a combined market value of nearly $ 60 billion.
Skeptics abound
Under the new proposal, Terra plans to distribute tokens to owners of the old moon – which will soon be renamed “classic moon” – and UST tokens.
About 30% of the tokens will go to a pool of investors in the Terra community; 35% will go to those who held the moon before its collapse; 10% for holders of pre-collapse VAT numbers. An additional 25% of tokens will be awarded to traders who still own luna and UST after the collapse.
Luna was up more than 20% on Wednesday, according to data from CoinGecko. The VAT was up to 50%.
Many market watchers are not convinced that Terra’s revival plan will work.
“There has been a massive loss of confidence overall in the Terra project,” said Vijay Ayyar, head of the international at cryptocurrency exchange Luno.
“This is an already very crowded space with a number of platforms already well established that have a lot of development activity. I don’t see why Terra should be successful here.”
The Terra debacle has silenced investor confidence bitcoin and the broader cryptocurrency market, which has collectively lost around $ 600 billion in value in the past month alone.
Regulators are getting worried, with the likes of Federal Reserve Chairman Janet Yellen and European Central Bank President Christine Lagarde calling for urgent regulation of cryptocurrencies – especially stablecoin.
