Terra founder Do Kwon shares plan to save the UST stablecoin peg
Do Kwon, CEO of Terraform Labs, will not admit defeat. After an 18-hour wait in which his coins Terra (LUNA) and TerraUSD (UST) endured a face-ripping freefall, Do Kwon has announced his “rescue plan" for the Terra community.
Terra is down 90% from its all-time highs, while the “stablecoin” UST is 75% below the dollar parity. But have no fear, cocky Kwon has planned “several remedial measures,” to rescue the billions wiped off the total Terraform Labs market cap.
2/ I understand the last 72 hours have been extremely tough on all of you - know that I am resolved to work with every one of you to weather this crisis, and we will build our way out of this. Together.
In a nutshell, the “decentralized” stablecoin protocol UST has come up with a preliminary solution to its disastrous situation where its peg to the U.S. dollar has broken. The process should reinforce the burning of UST, which so far, has been ineffective in achieving dollar parity for the stablecoin.
In the above Tweet thread, Kwon suggested that his team will increase basepool from 50M to 100M SDR, and decrease PoolRecoveryBlock from 36 to 18. This will increase minting capacity from $293 million to around $1200 million.
In essence, the team will mint four times more UST than usual. The process of creating value out of thin air has already coined a new crypto term–“Kwontative easing”–or money printing.
It’s unclear why Kwon wrote “$1200M” rather than $1.2 billion; some Twitter commentators suppose it’s to lessen the blow and tone down the scale of the problem.
Adil Abdulali, Head of Portfolio Management for Securitize Capital, told Cointelegraph that “UST is an ‘algorithmic’ stablecoin and is not backed by cash reserves.” In a word of warning, he said:
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