Terra to Stake 240M LUNA to Help Cushion Unbridled Selloffs

Embattled blockchain protocol Terra Network has shared more details with respect to Proposal 1166 which was first unveiled by founder Do Kwon on Wednesday to help restore normalcy to the UST stablecoin peg that has continued to dwindle. 

As contained in a Twitter thread, Terra said that “the prevailing peg pressure on $UST from its current supply overhang is rendering severe dilution of $LUNA,” and that “the primary obstacle is expelling the bad debt from UST circulation at a clip fast enough for the system to restore the health of on-chain spreads.”

In order to do this, the proposal details a plan to burn a total of 1,388,233,195, an approximated figure that comes off as 11% of the total circulating supply UST. Some of the stablecoins that will be burned will be sourced from the UST cross-chain on Ethereum which currently holds approximately 371 million tokens.

The proposal also seeks to burn the remaining UST in the community pool, while the blockchain startup wants to stake as many as 240 million LUNA coins which will help defend the network from governance attacks.

The Proposal has received as many as 468,576,994 at the time of writing and while it ends in 6 days’ time, the total number of Yes received came in at 293,930,912, representing 62.73% of the total votes. Should the proposal be ratified by the community as it is looking, the burning process will be further expedited.

Terra (UST) Algorithmic Stablecoins and the Backlash

UST is an algorithmic stablecoin whose operations differ significantly when compared with those of its peers like USDT and USDC.

While it is still in its infancy, the belief is that its growth will help reduce the crypto ecosystem’s overall dependence on the United States Dollar, however, the turn of events of UST has stirred more backlash from critics as to the flaws in the UST model.

Despite the massively bearish outlook, the fact that the Terraform Labs and the Luna Foundation Guard are keeping faith with the community is convincing enough for investors to hope for brighter days ahead.