Ethereum co-founder Vitalik Buterin believes that the struggling Terra (LUNA) project should prioritize small holders as part of any proposed compensation plan.
It was widely reported that the Terra ecosystem suffered a death spiral around May 9, resulting in a 100% drop in LUNA and the loss of the Terra USD (UST) stablecoin’s peg to the U.S. dollar ($0.16 at the time of writing).
With investors in LUNA and UST suffering huge losses, the community is now looking for ways to rebuild the ecosystem and potentially provide relief to many who have suffered financial losses.
One of the community proposals—assuming the UST peg to the U.S. dollar is eventually stabilized—was to first repay all initial deposits (not earnings) to small UST holders to "significantly boost general morale and sentiment", while wanting to How to compensate creditors and large investors. The payout is estimated to be between $1 billion and $1.5 billion.
On May 15, Buterin tweeted support for the idea, noting that the focus should be on small investors in need of capital, and then go further to cover whale holder losses:
"Ordinary UST small holders who are told by an influential person '20% against the dollar' will receive unanimous sympathy and relief, while the wealthy need to take responsibility and (sorry for your loss )."
While the ethereum co-founder did not explicitly call for regulation, he emphasized that potential safeguards such as financial deposit insurance could be useful in these cases.
"An interesting unrelated issue is Singapore's employment laws. More regulation for low-paid workers and a more self-reliant approach for wealthier workers. It's a good mix, in my opinion," he said.
At this stage, it is unclear whether the project will be able to rebuild, or whether it will aim for a temporary revival to cover investor losses, however difficult that may be. Notably, the proposal related to Buterin’s comments was updated this week and is now considering payments to all users, capped at $50,000 per wallet.
Another idea floating around online is to develop a hard fork upgrade for the Terra blockchain, dubbed “TERRA 2,” alongside the launch of a liquidity pool that would re-peg UST.
Over the weekend, however, Binance founder and CEO Changpeng Zhao slammed the idea, noting on Twitter that “forks don’t add any value to new forks. This idea is too good to be true.”
Before the collapse of LUNA and UST, the Luna Foundation Guard held approximately $2.7 billion worth of Bitcoin (BTC). When referring to the idea of rebuilding UST, CZ also questioned, "All the Bitcoins that should have been used as reserves have arrived. where it goes?"
Terraform Labs founder Do Kwon, who resurfaced online late last week, also proposed rebuilding the Terra blockchain to reset "network ownership" and distribute 1 billion LUNA tokens to the community.
However, Kwon’s proposed “Terra Ecosystem Revitalization Plan” has met with strong opposition from prominent figures in the crypto community, such as Dogecoin co-founder Billy Markus, who called on Kwon to leave the industry, stating:
"If they want to make up the victims of their stupid failed deal, instead of using new funds from new victims, they should use the money they already got from investors to pay them back."
Cointelegraph Chinese is a blockchain news information platform, and the information provided only represents the author's personal opinion, has nothing to do with the position of the Cointelegraph Chinese platform, and does not constitute any investment and financial advice. Readers are requested to establish correct currency concepts and investment concepts, and earnestly raise risk awareness.
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