Desperate efforts to save the Terra ecosystem are being made by its founder, Do Kwon, who also serves as CEO of Terraform Labs, as he announced a series of actions aimed at restoring UST’s link to the US dollar.
Do Kwon after remaining for 18 hours without comment – a period during which the Terra ecosystem’s LUNA currency LUNA and the Blockchain’s stablecoin, the TerraUSD (UST), suffered an unprecedented free fall – announced what he hopes will be a rescue plan for the Terra community.
LUNA has retreated 96% from all-time highs, while the UST stablecoin is down 35% against the dollar.
In an effort to save Terra, Kwon has designed some measures, which he hopes will be “corrective”, to rescue the billions wiped out of Terraform Labs’ total market cap.
In short, the “decentralized” UST protocol hopes that it has found a preliminary solution to escape its disastrous situation, as its link to the United States dollar has been broken.
The proposed solution creates … new terminology
Well, Kwon proposed that his team would increase the base pool from 50 million to 100 million special drawing rights (SDRs) and reduce the PoolRecoveryBlock from 36 to 18. This would increase the cutting capacity from $293 million to about $1,200 million.
Essentially, his team will “cut” (create) four times more UST than usual. The process of creating value out of thin air has already “given birth” to a new term in the cryptocurrency industry, called “Kwontative easing” or money printing.
Adil Abdulali, head of portfolio management for Securitize Capital, commented:
“Unlike other stablecoins such as USD Coin and Tether, UST is an ‘algorithmic’ stablecoin and is not backed by cash reserves. In comparison, Circle ensures the stability of USDC by backing each USDCoin with one US dollar,”
In conclusion, it seems very unlikely that Do Kwon will be able to save UST, bringing its exchange rate to $1.
However, if he succeeds and at the same time LUNA returns to all-time highs, then it will undoubtedly go down in history as the greatest comeback in the history of the cryptocurrency industry.
