Do Kwon Pledges to Rebuild UST (This Time With Collateral Backing)

Following a failed attempt to defend the peg for the TerraUSD (UST) stablecoin, TerraForm Labs CEO Do Kwon has finally admitted that it is now embarking on a plan to “rebuild UST.”

Recall that a sleuth of market events had caused UST to lose its peg from $1 to as low as $0.2, with ecosystem token Terra (LUNA) also dropping by over 90% in 24 hours.

In a tweet thread on Wednesday, the troubled founder admitted that there was “no way around the current situation” without allowing existing UST holders to sell and exit their position. He further outlined a number of measures the project would be taking to restore the UST peg, albeit over a period of time.

TerraUSD (UST) Repeg Plan

According to Do Kwon, the project will utilize its known peg mechanism to try and absorb the supply of UST holders seeking to exit the system. TerraForm Labs is backing a new proposal that increases the peg mechanism minting capacity from $293 million to $1200 million. This approach will reportedly help to absorb the exiting UST supply faster, albeit with no guarantees of completely easing selling pressure.

Meanwhile, Terra will look to adopt a more familiar approach to stablecoins if its peg ever recovers. “As we begin to rebuild UST, we will adjust its mechanism to be collateralized,” Do Kwon confirmed in the Twitter thread. Unlike Terra’s failed model where UST is traditionally minted by locking LUNA tokens, a collaterized approach with USD or other hard assets ensures the stablecoin is already redeemable at the defined peg.

Meanwhile, the failure of UST adds the project to the unending list of failed algorithmic stablecoin experiments. As noted earlier, LUNA is currently trading at $2.18, a significant 92% decline from yesterday’s high, while the UST ‘stablecoin’ is currently at 0.457.

Source: https://coinfomania.com/terra-ust-repeg-plan-do-kwon/#utm_source=rss&%23038;utm_medium=rss&%23038;utm_campaign=terra-ust-repeg-plan-do-kwon