The Terra ecosystem was completely ruined this week, bringing a large portion of the cryptocurrency market along with it. Its stablecoin algorithmic, Terra USD (UST) fell well lower than its $1 peg and its twin token Luna was wiped out to a value of nearly zero.
Although the market overall is improving, the collapse of UST and Luna erased the majority of cryptocurrency investors’ lives savings. The result was an entire Terra the community and its creator Do Kwon, proposing plans to repair the harm done.
One suggestion in the Terra forum suggests that Terra should make investors “whole” again with its remaining funds. Ethereum founder Vitalik Buterin for the idea and has suggested some adjustments.
Buterin was in agreement with a twitter user who suggested that Terra should be focusing on aiding “smaller wallets,” or people with “a couple thousand or more of UST deposited in Anchor,” rather than “rich whales.”
“If Terra just focused on the ‘poorest’ 99.6% of wallets, then they could make this gigantic group 100% whole,” the user tweeted on Friday..
Buterin The user retweeted her tweet on Saturday The tweet read: “Strongly support this. A coordinated show of sympathy and relief for the average smallholder of UST who were told a lie about “20% interest rates in the US dollar by an influencer, personal accountability, and SFYL [or Sorry for what you lost] to those who are wealthy.”
He said”The “obvious precedent is FDIC insurance,” which is “up to $250,000 per person.”
The Federal Deposit Insurance Corporation is a federal organization that was established in the 1930s, which was a Great Depression-era rule that marked the first time that the government backed bank deposits were backed by the government in U.S. history. The regulation was part of the New Deal series of government initiatives that restored confidence within the banking system but was also criticized for excessive government involvement in business.
Buterin was not able to endorse regulation of the until now not-regulated crypto industry Buterin did mention that similar regulations are “interesting.” His comments are notable due to the president Joe Biden signing an executive order in March that directed the authorities to “”ensure responsible innovation in digital assets,” and the crypto community asking what “responsible” means.
“An interesting unrelated one is Singapore employment law,” Buterin tweeted. “Stronger regulation for low-earning employees, and a more figure-it-out-yourself approach for the wealthier. IMO (or, in my opinion things like this are great mix of formulas.”
Buterin also voiced her displeasure about the algorithmic stablecoins on Twitter in a tweet, stating they “‘algostable’ has become a propaganda term serving to legitimize uncollateralized stables by putting them in the same bucket as collateralized stables.”
He said “we need to really emphasize that the two are very different.”
UST is an algorithmic stability coin that is, it does not have reserves. It is instead, it has value through an algorithm which is programmed to create an equilibrium between the stablecoin and its partner coin, which is in this case, Luna. Each when an UST token is issued and minted, the equivalent of one dollar for Luna is burned or taken out of circulation as well, in order to keep the peg.
When the UST stablecoin was withdrawn and its token sister Luna down with it.
UST has traded at 14 cents which is down by 85percent in the past seven days. Luna remains at a 100 percent loss over the same period, trading near the same level.