The recent rise in the value of LUNC and USTC, tokens on the Terra Classic blockchain, is linked to efforts by the Terra Classic community to recover from the collapse of the original Terra blockchain in May 2022. The primary focus has been on restoring the peg of the stablecoin USTC to the US dollar.
LUNC, Terra Classic's native token, plays a crucial role in absorbing USTC price fluctuations and participating in network governance. USTC, the algorithmic stablecoin, aims to maintain a 1:1 peg to the US dollar by adjusting its token supply through minting and burning. However, the collapse in May 2022 led to USTC losing its peg, causing a significant drop in LUNC's value.
In response to this crisis, the Terra Classic community has been actively working to recover and enhance the value of its tokens. A key initiative involves reestablishing the USTC peg to the US dollar at the code, consensus, and guideline levels. The community approved the proposal named "Ziggy: Re-Peg UST (Signal)" in October 2022. This proposal also included a substantial increase in the Tobin tax to 100%, effectively halting the minting and redeeming of USTC. The purpose of this move is to prevent further dilution of USTC and prepare for the process of reducing it to $1.
The process of repegging USTC to $1 is being led by two developer teams: the Joint L1 Task Force and the RedlinerDrifter-led Quant team. This strategic move is expected to have a positive impact on the LUNC price, bringing it closer to the community's target of $1. The repegging involves various steps, including resetting the oracle price feed, adjusting the seigniorage pool, and burning excess USTC supply. The recent rise in USTC price can be attributed to the burning process, which reduces supply and increases demand for the stablecoin. This burning of USTC also benefits LUNC holders by boosting the value of their collateral and governance power.
Beyond the technical aspects, the positive sentiment and confidence within the Terra Classic community are contributing factors to the upward trend in LUNC and USTC prices. The community has displayed robust support and enthusiasm for revitalizing the Terra Classic ecosystem. Active participation in governance and development, coupled with the celebration of successful proposals like the v2.3.0 upgrade featuring the dynamic validator commission module, reflects the community's commitment to improving network functionality and security.
Anticipation for upcoming projects and applications on the Terra Classic blockchain, such as the Terra Classic Swap—a decentralized exchange enabling users to trade LUNC and USTC with other cryptocurrencies—further fuels positive sentiment. The collective efforts and engagement of the Terra Classic community are playing a vital role in the resurgence of the ecosystem.
In summary, the upward trajectory of LUNC and USTC prices can be attributed to the ongoing initiatives aimed at re-pegging USTC to $1, the strategic burning of USTC supply, and the prevailing positive sentiment and confidence within the Terra Classic community. These concerted efforts reflect a commitment to the recovery and revitalization of the Terra Classic ecosystem, signaling optimism for the ecosystem to reclaim its previous levels of success and value in the coming times.
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