Vitalik: Terra should protect the smallholders, not the whales

cointelegraph.com:

Ethereum co-founder Vitalik Buterin thinks that the beleaguered Terra (LUNA) project should prioritize small hodlers as part of any proposed reimbursement plan.

As widely reported, the Terra eco-system suffered a death spiral around May 9 which resulted in LUNA tanking 100% and the Terra USD (UST) stablecoin losing its USD peg (priced at $0.16 at time of writing).

With LUNA and UST investors reeling from substantial losses, the community is now looking at ways to reestablish the ecosystem and potentially offer relief to the many people who got burned financially.

One such community proposal — assuming the UST dollar peg is eventually stabilized — is to first reimburse all of the initial deposits (not yield) of small UST holders to “greatly improve general morale and sentiment” while figuring out how to sort creditors and larger investors later. The payout is estimated to cost between $1 billion to $1.5 billion.

Buterin showed support for the idea via Twitter on May 15, noting that the focus should be on the smaller investor who needs the money, before going a step further by suggesting that the whale hodlers should cop the loss:

While the Ethereum co-founder didn’t explicitly call for regulation, he did highlight that potential cover such as financial deposit insurance could be useful in these circumstances.

“An interesting unrelated one is Singapore employment law. Stronger regulation for low-earning employees, and a more figure-it-out-yourself approach for the wealthier. IMO things like this are good hybrid formulas” he said.

The obvious precedent is FDIC insurance (up to $250k per person)An interesting unrelated one is Singapore employment law. Stronger regulation for low-earning employees, and a more