Because the Terra (LUNA) blockchain will split at 4 a.m. tomorrow, a proposal to burn USTs from the community pool has received widespread support through participatory voting. More than 1 billion UST will be removed from circulation, accounting for 11% of all tokens in circulation. The community is hoping to resurrect the stablecoin’s price as much as possible.
Terra’s stake community decisively voted in support of burning over 1 billion UST in a bid to restore the UST peg to its $1 path. Initially, a poll was held on May 12, the day after Do Kwon tweeted on the need for a re-peg of the UST:
“Above all else, the only way forward will be to absorb the supply of stablecoins that want to exit before $UST can begin to restart. There is no way around this problem. »
A decision had to be made within seven days of the proposal’s submission. Still, the process was stymied by the voting system based on the community pool, which was also being utilized for another vote.
On May 20, a fresh vote proposal was put in place, based on the same LUNA token burn scheme.
Meanwhile, network validators and LUNA holders have voted in favor of the blockchain fork that will occur early tomorrow morning in an attempt to rebuild Terra on a new design free of UST.
However, despite the fork, the LUNA tokens will still be burned. Even if a “new” blockchain is deployed in parallel, this will have the effect of relieving the pressure on the UST due to the way too huge amount of tokens in circulation, more than 11 billion at the time of writing these words.
Details and consequences of burn
The burn process will be implemented in two stages. More than 1.3 billion UST will be transferred to a burn address in the beginning. Then, to relieve the burden, even more, another 371 million UST from cross-chain bridges will be burnt.
at the initiative of its own community, the exchange MEXC announced yesterday, Thursday, May 26 that it would send all LUNA tokens generated by its platform’s transaction fees to Terra’s burn address.
This decision was similarly taken after a community vote on the exchange, with burn receiving more than 98 percent of the vote. From May 26 through June 26th, this plan will be implemented.
Surprisingly, the community has long advocated for a big token burn in order to restore Terra’s 2 assets to their previous state. Do Kwon, on the other hand, stated two days after providing the burn address that transferring tokens to it was not a smart idea and that he simply provided it for information:
“To clarify, as I’ve noted many times, I don’t think sending tokens to this address for burning is a good idea – nothing will happen other than you will lose your tokens. I want there to be no confusion. »
In any case, on Saturday, May 28th at 4 a.m., the blockchain as we know it will fork. As a result, the future of Terra remains uncertain, both for the devs, who are paralyzed by the fork and for the community, which still appears to desire a large fire.