Terra is a decentralized financial payment network that rebuilds the traditional payment stack on the blockchain. Luna is the reserve currency of the Terra platform. It has three core functions: i) mine Terra transactions through staking, ii) ensure the price stability of Terra stablecoins and iii) provide incentives for the platform’s blockchain validators.
Kwon supports a proposal from the Terra community that seeks to increase LUNA’s minting capacity; he believes it may be the key to returning UST to parity with the dollar.
The CEO and founder of Terraform Labs Do Kwon, has shared an action plan to rescue the stablecoin. Land USD (UST), which, in recent days, has faced difficulties in maintaining its parity with the U.S. dollar.
Kwon took to Twitter this Wednesday to report plans amid a collapse that has seen LUNA, the project’s other native cryptocurrency, slide more than 90%. “I understand that the last 72 hours have been extremely hard for all of you. Know that I am determined to work with each of you to overcome this crisis, and we will build our way out of this crisis. “he wrote.
As you have been reporting DiarioBitcoin , UST was volatile over the weekend after losing its 1:1 peg a “peg” is a specified price for the rate of exchange between two assets. to the dollar, a phenomenon that coincided with massive liquidations in several DEX (decentralized exchange)A peer-to-peer exchange allowing users to trade cryptocurrency without the need for an intermediary. ( exchange businesses that allow customers to trade cryptocurrencies for fiat money or other cryptocurrencies. decentralized). The incident was repeated again on Monday, when the stablecoin a cryptocurrency with extremely low volatility, sometimes used as a means of portfolio diversification. Examples include gold-backed cryptocurrency or fiat-pegged cryptocurrency. fell to USD $0.6, prompting a Luna Guard Foundation (LFG) to deploy part of its reserves of Bitcoin the biggest and most popular cryptocurrency in the world. It is a decentralized digital currency that enables users to make trustless peer-to-peer transactions. .
Despite the various efforts of the organization behind the ecosystem that supports the Earth to rescind the UST, the stable currency currency is a medium of exchange that defines value. has failed to return to its expected level of 1 dollar. . At the time of going to press, it was trading well below at USD $0,3.
Action plan to rescue UST
To bring UST back to parity, Kwon indicated that he was supporting a community proposal that would increase the amount of LUNA being minted per day by four times. This would allow the ecosystem to cope with the high demand for LUNA from investors looking to dump a sudden sell-off of digital assets. UST due to its recent collapse.
“ First of all, the only way forward will be to absorb the supply of stable currencies that [seek to be liquidated] before UST can begin to reattach. There is no way around it “explained the founder.
It should be noted that UST relies on LUNA to maintain its 1:1 link to the US dollar through a set of minting and burning destroying a certain number of digital coins to reduce their issue. This method is used to fight inflation and increase the value of cryptocurrency. All token burning transactions are recorded in the blockchain as a transaction. Therefore, anyone can verify that the coins were destroyed. mechanisms. Users can always trade 1 UST for USD $1 of LUNA; cada vez que hacen esto, también destruyen ese UST y lo sacan de circulación. Sin embargo, solo se puede vender una cantidad limitada de UST por día.
Selling pressure has increased in the midst of UST’s disengagement, which seems to have affected the normal functioning of the burning and coining mechanism, affecting the prices of LUNA, which has plummeted more than 95% in the last 24 hours.
“ The price stabilization mechanism is absorbing the UST supply (over 10% of the total supply), but the cost of absorbing so many stablecoins at the same time has stretched the exchange differential in the chain to 40%, and Luna’s price has dropped dramatically absorbing the arbs. “, says Kwon.
LUNA could suffer side effects
Specifically, Kwon showed his support the opposite of Resistance, it is a threshold that crypto’s price doesn’t fall below. for Proposition 1164, which would was submitted at the government forum of Earth and seeks to increase LUNA’s minting capacity from USD $293 million to USD $1.2 billion.
As highlighted by The Block a file containing information on transactions completed during a given time period. Blocks are the constituent parts of a blockchain. By increasing the amount of USTs that can be redeemed for LUNA, the rate at which investors can exit their UST positions through LUNA will increase. The theory is that while this could increase the amount of LUNA minted in the short a trading technique in which a trader borrows an asset in order to sell it, with the expectation that the price will continue to decline. In the event that the price does decline, the short seller will then buy the asset at this lower price in order to return it to the lender of the asset, making the difference in profit. term, it could decrease it over a longer period of time and help restore parity with the dollar.
“ Permitir una quema de UST más eficiente y la acuñación de LUNA ejercerá presión en el corto plazo sobre el precio de LUNA, pero será una forma efectiva de hacer que UST vuelva a fijarse, lo que eventualmente estabilizará el precio de LUNA “, said the proposal, which adds:
Yes, billions of UST will be burned and LUNA will be significantly diluted. However, there is no limit on LUNA supply, this market an area or arena, online or offline, in which commercial dealings are conducted. mechanism will actually work to bring stable UST and stable LUNA price (although probably at a lower price for LUNA).
Kwon admitted that the measure could have a ” high coast ” para los titulares de UST y LUNA but pledged to continue exploring options to reduce the oversupply of the stablecoin and stabilize the market. He added that, in the future, and once the USD $1 level is regained, the stablecoin will be redesigned so that its mechanism is guaranteed.
11/ Naturally, this is at a high cost to UST and LUNA holders, but we will continue to explore various options to bring in more exogenous capital capital is most commonly defined as the large sum of money you would use to invest. to the ecosystem & reduce supply overhang on UST.
– Do Kwon ???? (@stablekwon) May 11, 2022
So far, 101 million LUNA have voted in favour of the proposal and not a single MOON a situation where there is a continuous upward movement in the price of a cryptocurrency. Often used in communities to question when a cryptocurrency will experience such a phenomenon, saying “When moon?” It is usually combined with “When Lambo?” has been used to vote against, which represents 63% of the participants in favour.
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Article by Hannah Estefania Perez / DiarioBitcoin
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