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Terra Announce Emergency Measures To Save Luna and UST

Terra is taking emergency measures to save its ecosystem.
| CryptoPress
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Terra is taking emergency measures to save its ecosystem. The company announced today that it will be burning the equivalent of 1.4 billion USTs, and increasing Luna’s mintage rate by over 300%.

The move comes as a response to the precipitous decline in LUNA’s price, which has fallen almost 100% since last week. Terra’s stock price has plummeted as well, but CEO Astrid Reiner remains optimistic. “We’re confident in our decision,” she said at a press conference today. “We have faith that this is the right course of action for our planet’s future.”

The Terra ecosystem collapse continues to evolve: Terra USD (UST) remains below its expected level of US$1, and its sister token, LUNA bleeds out in a drop of more than 95%. Meanwhile, developers are doing everything they can to rescue the ecosystem. This Thursday, new emergency measures have been announced to stop the massive bloodbath that Terra’s two native coins are seeing; including the rollout of a previous proposal by Terraform Labs (TFL) founder Do Kwon to burn UST and increase LUNA minting capacity.

Terra’ founder Do Kwon showed on Wednesday his support for proposal 1164, which was presented at Terra’s governance forum, and seeks to increase LUNA’s minting capacity from USD $293 million to USD $1.2 billion. As part of this proposal, TFL will burn all its UST holdings in exchange for increasing LUNA supply by 65%, up from 0% right now. The rationale behind this move is that it will help generate demand for LUNA tokens and thus restore confidence among investors who see their investment shrinking with every hour that passes without any sign of reversal on either side of the table.”

In an effort to stabilize the price of LUNA, Terra has announced that it will increase the amount of UST that can be redeemed for LUNA, potentially reducing its overall supply.

As The Block highlights, increasing the amount of UST that can be redeemed for LUNA will increase the rate at which investors can exit their UST positions through LUNA. The theory is that while this could increase the amount of LUNA minted in the short term, it could decrease it over a longer period of time and help restore parity with the dollar.

“Allowing more efficient UST burning and LUNA minting will put short-term pressure on the price of LUNA, but will be an effective way to bring UST back to fix,” Terra’s proposal said. “This market mechanism will actually work to bring stable UST and stable LUNA price (although probably at a lower price for LUNA.

In a stunning display of support for the proposition, 101 million LUNA have voted in favor of the proposal and not a single LUNA has been used to vote against it, representing 63% of the participants in favor.

Photo by Vinicius Marques on Unsplash.

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