As the fork of the Terra blockchain (LUNA) will take place tomorrow around 4am, a proposal to burn the USTs of the community pool has been widely accepted via a participatory vote. More than 1 billion USTs will be deleted, which is 11% of the total number of tokens in circulation. The community hopes to revive the stablecoin price as much as possible.
More than 1 billion USTs burned on Terra
In an attempt to revive the UST peg to its $1 price, the Terra staker community has overwhelmingly voted to burn over 1 billion USTs.
Initially, a vote was called on this issue on 12 May, the day after Do Kwon tweeted about the need for a re-peg of the UST:
“First and foremost, the only way to move forward will be to absorb the supply of stablecoins that want to get out before $UST can start rebooting. There is no way around this problem. “
A decision was to be made within 7 days following the proposal, but the proposal was crippled due to the community pool voting system, which was being used for another vote already in progress.
A new voting proposal was therefore put in place on 20 May, still based on the same LUNA token burn plan.
In the meantime, network validators and LUNA holders voted in favour of the blockchain fork that will take place tomorrow morning early in the night, in an attempt to rebuild Terra on a new architecture without UST.
But the burn of LUNA tokens will still take place despite the fork. This will relieve the pressure on the UST due to the far too large number of tokens in circulation, over 11 billion at the time of writing, even though a “new” blockchain will be deployed in parallel.
Details and consequences of burn
The burn process will be deployed through 2 phases. In the first phase, more than 1.3 billion USTs will be sent to a dedicated burn address. Then, another 371 million USTs from the cross-chain bridges will also be burned to further relieve the pressure.
In parallel to this burn, which is therefore taking place directly within the Terra blockchain through the initiative of its own community, the MEXC exchange indicated yesterday, Thursday 26 May, that it would send all LUNA tokens from its platform’s transaction fees to Terra’s burn address.
This decision was also taken following a community vote on the exchange, with over 98% of votes in favour of the burn. The plan will run for 1 month, from 26 May to 26 June.
Interestingly, the community has long seemed to favour a massive burn of tokens in an attempt to return Terra’s 2 assets to normal. Do Kwon, on the other hand, indicated 2 days after giving the dedicated burn address that sending tokens on it was not a good idea, and that he was giving it purely for information purposes:
” To clarify, as I’ve noted several times, I don’t think sending tokens to this address to burn is a good idea – nothing will happen, except that you’ll lose your tokens. I don’t want there to be any confusion. “
Anyway, the blockchain as we know it will fork around 4am tomorrow, Saturday 28 May. Terra’s future therefore still seems uncertain, both for the developers who are paralyzed because of the fork and for the community that still seems to prefer a massive burn.
