Terraform Labs published extra measures on Thursday to help restore the TerraUSD (UST) peg with the US dollar and support Luna's cratering price.
Chief among them is proposal 1164, as Terraform Labs CEO Do Kwon highlighted yesterday. This is designed to increase the amount of UST that can be swapped for Luna by four times. The goal is to allow UST holders to cash out, with the hope of improving its peg to the dollar. The move, however, puts significant downwards pressure on the price of Luna — which has fallen even further overnight to $0.09.
The proposal has reached the pass threshold but appears to have six days remaining. "Once the new base pool proposal passes, this will also expedite the process," Terraform Labs said in a tweet thread on Thursday.
Terraform Labs also mentioned three further actions which it is taking. First, it is going to burn the remaining UST in Terra's community pool. This is currently just over 1 billion UST, although that's only worth about $590 million at current prices.
Second it will burn the 371 million UST that's currently on the Ethereum blockchain, which is being used for liquidity incentives. This will be sent to the Terra network and then burned. In total, this adds up to 1.39 billion UST — around 11% of the stablecoin's liabilities, according to the proposal.
Third, Terraform Labs has staked 240 million LUNA in order to protect the network against potential attacks. Since the price of Luna is so low, it's theoretically possible that someone could buy up a lot of cheap Luna and use it to attack the network. Yet with this amount of staked Luna defending the network, that becomes a lot harder.
"Please note that TFL [Terraform Labs] is in the war room and has been non-stop for the past four days working on solutions and potential avenues to help affected users and stop the bleeding," Terraform Labs said in one of the tweets.
For more breaking stories like this, make sure to subscribe to The Block on Telegram.
© 2023 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.