Terra’s Do Kwon Finally Releases Recovery Plan for UST, Community Recalls “Lehman Brothers” Tragedy

Mr. Kwon proposed major changes to the LUNA/UST balance design in order to accelerate the process of “absorbing” TerraUSD (UST) stablecoins.

Increase minting capacity would accelerate UST absorbing: Proposal

Kwon has taken to Twitter to share the details of emergency proposal 1164. It addresses the unmatched de-pegging of TerraUSD (UST) stablecoin, which is now avaliable with a 57% “discount” to its intended peg to $1 equivalent.

1/ Dear Terra Community:

— Do Kwon ? (@stablekwon) May 11, 2022

According to him, there is no other way to stabilize the situation besides aggressively destroying the UST tokens that are leaving the market. This, in turn, will increase the UST price and make it closer to the regular 1:1 peg to USD.

As such, Do Kwon proposes to increase the “minting capacity” of the protocol from $293 million to $1.2 billion in equivalent: it will help to accelerate the process of token burning.

Technically, the process seeks to adjust two parameters in Terra’s (LUNA) codebase, namely BasePool and PoolRecoveryBlock metrics.

By press time, 34.5% of LUNA enthusiasts has voted for the proposal; almost everyone supported its implementation.

Terra’s tragedy looks like Lehman Brothers collapse, DeFi veteran says

As covered by U.Today previously, following the massive Bitcoin (BTC) collapse, investors started aggressively withdrawing their liquidity from UST and associated mechanisms. As a result, it lost its peg to the U.S. Dollar, while its underlying asset, Terra (LUNA), collapsed by 95%.

Meanwhile, one of the key figureheads of SushiSwap (SUSHI) and Polygon’s chief informational security officer, Mudit Gupta, compares this collapse with one of the bloodiest dramas on the financial markets:

I don’t think the crypto space has ever seen anything of this magnitude and severity before. Even the DAO hack feels nothing compared to the Terra crash. This is going to have long-lasting consequences. It’s bad for the whole space. (…) This feels very similar to Lehman Brothers situation in 2008 that caused a financial crisis. It didn’t matter if other companies were doing well or not. Everything tanked.

According to him, the crash of the second largest smart contracts platform will leave no crypto business unaffected.