All you need to know about Terra-Luna revival plan

Following the massive loss investors experienced when the supply-demand proportion of the algorithmically built stablecoins failed, numerous crypto exchanges, including Binance and Coinbase, have blocked Terra-Luna coins. Do Kwon, Terra Labs’ CEO and co-founder, has finally spoken out about the Terra-Luna stablecoins fall. The founder is seeking a plan to bring the Terra ecosystem back from the brink.

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The hard fork is the name of this strategy. Remarkably, this is the second resurrection strategy devised by the company’s boss. Kwon advocated ditching the Terra stablecoin and transferring Luna tokens to community members in his initial proposal on May 14, but that didn’t go down well with the community. 

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According to reports, the founder will address design problems in the Terra system. A hard fork is a process of validating all invalid blocks and transactions on the blockchain.

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Terra will be coupled to a separate blockchain, following which the Terra token will be changed to TerraClassic, Terraform Labs’ non-algorithmically created stablecoin.

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To move ahead, the proposal to rescue the Terra currency requires dispersing tokens. “The holders of Luna have so severely been liquidated and diluted that we will lack the ecosystem to build back up from the ashes,” Kwon wrote on the Terra research forum. “While a decentralised economy does need decentralised money, Terra has lost too much trust with its users to play the role.”

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It’s worth noting that Terra and Luna are sister coins, and in order to keep the balance between them, users had to acquire Terra and then swap it for Luna, earning a decent profit. After both currencies crashed due to a supply-demand imbalance, the only option to save them is to re-distribute them.

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Kwon has suggested resetting the distribution of the network’s Luna tokens to 1 billion, 40 million of which would be given to holders before Terra was de-pegged from the US dollar over the weekend in order to “preserve the community and the developer ecosystem.”

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Furthermore, Binance CEO Chengpeng Zhao opposes the hard fork strategy. He advised investors to burn the token instead. The method of transferring crypto to a ‘dead wallet,’ from which the coins can never be retrieved, is known as burning. This could help stabilize the currency’s supply.

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When the quantity of tokens decreases, so does inflation. This may aid Terraform Labs in recovering their token. Although Kwon doesn’t really believe in burning coins, the CEO went against his initial hard fork strategy and publicly released a burn address for Luna at the demand of community members.

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Each Luna token sent to this address is promptly burnt, significantly lowering the circulating quantity of Luna tokens. The current supply of Luna is 6.1 trillion, exceeding that of Terra, which is just 1 billion.

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Kwon explained after revealing the Luna burn address that it was provided to users only for informational purposes and recommended against utilising it.

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“Happy to provide for information purposes but want to clarify that you should not burn tokens unless you know what you are doing – I for one cannot understand,” he wrote.

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Terraform Labs lacks a clear strategy for settling the Luna-Tera crisis. Investors may have to wait much longer to find out what the future holds.