cryptocurrency
Bulletins

Do Kwon's plan to revive the Terra blockchain wins approval

The UST stablecoin isn't part of it.

Do Kwon

Do Kwon offered a plan to salvage the Terra blockchain after luna and the UST algorithmic stablecoin lost nearly all value.

Photo: Woohae Cho/Bloomberg via Getty Images

Just weeks after one of the Terra blockchain's signature cryptocurrencies collapsed, here comes the reboot.

Token holders approved a plan to relaunch the Terra blockchain and distribute new tokens of the luna cryptocurrency by a wide margin Wednesday morning. Do Kwon, the crypto entrepreneur behind Terra, offered the plan as a way to salvage the Terra blockchain after luna and the connected UST algorithmic stablecoin, also known as TerraUSD, lost nearly all value in a sell-off after it lost its peg to the dollar earlier this month.

Under the approved plan, the original blockchain will henceforth be known as Terra Classic and its luna token renamed luna classic. New luna tokens hosted on the relaunched Terra blockchain will be airdropped to holders of the original luna token and UST coins starting May 27. UST will be left behind on the old blockchain.

The crisis for Terra started May 7 with a sharp drop in value for UST, which was supposed to be pegged one-to-one to the U.S. dollar, and exchangeable for luna dollar for dollar. It sank below $1 twice over the span of a few days and soon fell to 35 cents on the dollar.

Unlike most stablecoins, which are backed by reserves of fiat currency or commercial paper, UST relies on algorithms that dynamically seek to control the supply of UST and luna to maintain the stablecoin’s value at $1. As UST fell, luna fell too, in what some called a death spiral.

UST is currently trading at about 8 cents, according to CoinMarketCap.

"While UST has been the central narrative of Terra’s growth story over the last year, the distribution of UST has led to the development of one of the strongest developer ecosystems in crypto," Kwon wrote in the proposal. "The Terra ecosystem and its community are worth preserving."

Applications built on Terra Classic would migrate over to the new blockchain under the proposal.

The attempt to restart Terra and recoup some value for investors will be watched closely in crypto policy circles. The UST crash caught the attention of Treasury Secretary Janet Yellen, who called it a “bank run” in a Senate Banking Committee hearing this month. EU regulators are considering banning large-scale stablecoins altogether.

Ryan Deffenbaugh
Ryan Deffenbaugh is a reporter at Protocol focused on fintech. Before joining Protocol, he reported on New York's technology industry for Crain's New York Business. He is based in New York and can be reached at rdeffenbaugh@protocol.com.
terraterraform labsstablecoinsweb3do kwonustlunacryptocurrency
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