Cryptocurrencies haven’t had a good time in May and Bitcoin has been down for an unprecedented eight weeks in a row.TheIt collapsed from $ 85 at the beginning of the month to a fraction of a penny now. Terraform Labs, the developer behind the Terra blockchain and its UST and luna cryptocurrencies, has plans to reverse to crash.
that is Create a new blockchain called Terra, The name of the existing chain has been changed to Terra Classic. The new Terra will produce Luna Coins and the existing Luna will be replaced by the Luna Classic. New Luna coins will be minted and distributed to those who have lost money in the TerraUSD / Luna crash.
In particular, the new Terra blockchain does not support TerraUSD (UST).
Luna’s fall was caused by the depegging of terraUSD (UST).Designed to always hold a value of $ 1. Unlike stablecoins like tether and USDC, UST is not backed by a US dollar reserve. Instead, it is an algorithm stablecoin that holds pegs using Luna, the native cryptocurrency of the Terra blockchain. One UST can always be exchanged for $ 1 worth of Luna, even if the UST falls below the $ 1 value. The idea was that if UST fell to 99 cents, arbitrage traders would buy huge amounts of UST and exchange them for Luna. (((( ).
The system broke on May 8th, with UST extracting $ 2 billion at a time, of which hundreds of millions were sold. UST fell to 98 cents and the mechanism for exchanging UST for Luna could not catch up. As a result, investors lost confidence in the system and both UST and Luna crashed.
UST is currently trading at 8 cents and Luna is trading at a fraction of a cent. Over $ 17 billion of ciphers have been wiped out of the crash.
May 16th, Terraform Labs CEO Do Kwon Proposed a plan to “fork” the terra blockchain.. In essence, this means creating a new blockchain modeled after the previous blockchain. The Terra community agreed with the proposal on Wednesday, and the new blockchain will be available on May 27th.
“With overwhelming support, the Terra ecosystem has passed Proposal 1623, calling for the creation of a new blockchain and the protection of the community,” read Wednesday on Terra’s Twitter account.
Perhaps acknowledging the fundamental problem of tethering Luna to UST, Kwon’s proposal removes UST, formerly the main selling point of blockchain, from the terra ecosystem. “Terra’s app ecosystem includes hundreds of developers working on everything from DeFi to alternative labor markets, state-of-the-art infrastructure, and community experiences,” he said. Suggested that it should be maintained at the expense of terraUSD.
There is precedent for such a move. The most famous fork in the history of cryptography happened in Ethereum in 2016.After a hacker Stealing 3.6 million ethers from DAO -Worth $ 50 million at the time and now worth more than $ 7 billion-Ethereum developers fork the blockchain and are identical in all respects except the restoration of the stolen million ethers Created a new chain of. It caused cracks within the community, and some maintained the original chain to this day, calling it Ethereum Classic.
“The failure of the UST peg is the moment of Terra’s DAO hack,” Kwon said, referring to the aforementioned Ethereum hack. “A chance to get up from the ashes.”