Author | Qin Xiaofeng
Produced by | Odaily Planet Daily
Today, the long-dormant Terra Classic (LUNC) and TerraUSD (USTC) have once again become the focus of the crypto community.
The community voting results show that Proposal#11324"Re-peg USTC to LUNC" has been passed. Although there are still three days before the voting ends, the proposal has already exceeded the minimum threshold, and the votes in favor account for more than 78%. As soon as the news came out, the prices of LUNC and USTC soared, with the highest 24-hour increases of 24% and 83% respectively, which attracted a lot of attention.
However, USTC faces great resistance to re-pegging with LUNC, which is difficult to achieve in a short period of time. The fantasy of "USTC returning to $1" is even more difficult. In addition, the proposal may also cause the LUNC community to split again. Smart Stake publicly stated that it will shut down its validators once the proposal is passed.
Today, Terra Classic has long been a meme coin with no actual value. Its "biological father" Do Kwon has also focused on building the Terra ecosystem, and Terra Classic and Terra are gradually drifting apart.
1. New proposals are difficult to implement and are prone to failure
According to the forum information, Proposal#11324was proposed by Duncan Day, which mainly describes an operational framework for the LUNC community to rebind USTC from the code level, consensus level, and guidelines. The ultimate goal is to recover the value lost in the "decoupling" event in May 2022 while simplifying the destruction process of LUNC.
Duncan Day believes that the USTC price is not stable, which leads to the ineffectiveness of Terra Classic's ability to generate income - currently, the main profit generation depends on complex AMM strategies (mainly arbitrage), but the volatility of USTC prices hinders the development of arbitrage strategies, and is also not conducive to some consumer companies using USTC as a means of payment. Therefore, a stable USTC is of great significance to the entire Terra Classic ecosystem.
By re-pegging USTC to LUNC, that is, enabling the previous algorithmic stablecoin model, high-frequency transactions can increase the consumption scenario of LUNC-LUNC now charges a 1.2% fee for each on-chain transaction, and then sends these fees to the destruction address to reduce the supply of LUNC. The ideal goal is that USTC will eventually return to its pre-decoupling value ($1).
It sounds good, but there are many problems with this proposal.
One is the cost issue. Both early development and later implementation require funds. Where this money comes from becomes a problem. If the community is not interested in the expenditures required by developers or contributors for the plan, or if it is ultimately impossible to raise funds or resources for the plan, the proposal will fail by default.
Second, the final effect is uncertain. Proposer Duncan Day also said that implementation will be very difficult. If the test cannot be completed before the absolute deadline (May 27, 2024), it will ultimately fail. Under this expectation, even if the community initially approves the proposal, there is still a question mark as to whether it will be implemented in the end.
Third, the new proposal may also cause the Terra Classic community to split again. 13% of the people in this vote chose to oppose. Opponents believe that the previous collapse of USTC has proved that the algorithmic stablecoin model is a failure and should not be repeated; re-pegging will cause LUNC to die again, and it will be abandoned and delisted by major exchanges again.
“The community should focus on building organic demand for LUNC. Build innovative products to increase utility for LUNC. Smart Stake will vote against the proposal; if the proposal passes, Smart Stake will shut down its validator.” A Terra Classic ecosystem participant commented.
Some community members also consulted Binance about the new proposal, but the latter did not agree. "You asked me whether I should ask Binance? The L1 working group team is already communicating with Binance. Duncan could have asked them about the proposal, but he didn't. Why? Because their (Binance) answer was "No with veto". 100% . "
2. Do Kwon and TFL focus on Terra New Chain
The Terra Classic community is in an uproar, but the "biological father" Do Kwon and Terraform Labs (TFL) have not made any statement, because their focus is not on the old chain, but on the development of the new Terra chain.
Since the collapse of Terra last May, Do Kwon has been on the move, from South Korea, Singapore to Dubai. The latest situation is that Do Kwon may be hiding in Serbia. Considering that there is no extradition agreement between South Korea and Serbia, and the recent "voluntary withdrawal" of Matthew Albright's class action lawsuit against Terra and Do Kwon, Do Kwon can take a breather for a while and continue to be active in the crypto market for a long time. (Note: Two other class action lawsuits against TFL and Do Kwon filed by law firms Bragar Eagel & Squire, P.C. and Scott+Scott are still ongoing.)
According to DL News, TFL communications director Zion Schum confirmed that Do Kwon is still "actively involved in the company's daily operations." In order to promote the development of the new chain Terra, TFL has posted a number of positions on its official website, including smart contracts and full-stack engineers, all of which are remote offices, and Do Kwon will also interview employees in person. A TFL spokesperson said the company currently has about 40-50 employees.
(Terra official website recruitment position)
In January this year, TFL upgraded the original Station wallet, adding support for other Cosmos chains and simplifying the complex process of interacting with multiple blockchain network Dapps. For example, there is a "Quick Stake" function on Station. Users only need to select the blockchain they want to support and the number of tokens to stake on Station. Station will automatically select the best node based on the validator's past historical performance.
(Do Kwon personally promoted the Station wallet and invited the Cosmos core team to join Station’s cross-chain integration)
Currently, Station has secured about 24 Cosmos-based blockchain networks. A TFL spokesperson said that there are plans to expand Station to the Ethereum EVM chain in the near future.
In addition to Station, the Terra 2.0 ecosystem also has DAO infrastructure Enterprise, which provides original support for DAO. Users can create multi-signature wallets, new tokens or NFT communities. People familiar with the matter said that Do Kwon participated in the creation of the project as an advisor.
In addition, TFL said it is developing an economic module called Alliance. Other protocols register Alliance to become members of the alliance. Token holders of chain A can stake tokens on chain B; holders can get additional benefits while ensuring the security of both networks; alliance members can choose which tokens to accept through governance voting. More importantly, Alliance does not require pledgers to become liquidity providers, thus protecting them from impermanent losses. TFL plans to start rolling out Alliance next month. So far, 5 projects have said they will implement Alliance at launch.
Currently, Terra's official website lists a total of 50 ecological projects, covering infrastructure, DAO, wallets, games, NFT and other tracks. Of course, considering the big losses in algorithmic stablecoins, Do Kwon obviously did not work hard in this area this time.
3. Terra 2.0 and Terra Classic are drifting apart
"Terra is not a centralized platform that went bankrupt due to misuse of funds or fraud. It is one of the largest Layer 1 blockchains with two assets in the top 10 of CMC." In his confession last November, Do Kwon believed that the failure of UST was just accidental and that there was nothing wrong with Terra itself, so he decided to rebuild the ecosystem. It is both self-salvation and a proof of the bright prospects of blockchain. "I believe that the most important use case for encryption is to become a decentralized currency that transcends politics and nation-states. I still believe this today - I hope others will succeed in the mission where we failed."
The already broken Terra Classic obviously cannot support Do Kwon's ambition to rise again. Terra 2.0 is the focus of its development, and many projects have also migrated from the old chain. Of course, objectively speaking, Do Kwon and TFL still maintained the operation of Terra Classic after the collapse last year, and did not leave, leaving enough time to hand over the infrastructure to the most technically capable team.
Although Terra Classic has proposed some roadmaps for its revival plan, it has not caused a big stir, and the price of the coin has also soared and plummeted in the short term. For Terra Classic, the future is not clear, and it seems that it can only be used as a meme coin to entertain the market in public opinion.
