The entire Terra [LUNA] ecosystem was turned upside down as its stablecoin UST proved to be not so stable. Losing its $1 peg, the stablecoin stumbled down to a low of $0.30, earlier today. LUNA, on the other hand, seemed to be steering towards zero, the community speculated. At press time, the asset had witnessed a 97 percent daily drop as its price dipped to $0.13. As the price of both Terra’s native assets continues to plummet, Terraform Labs [TFL] came up with more solutions to revive the assets.
Just yesterday, Do Kwon unveiled his “recovery plan.” As per this plan, Kwon intended to surge the amount of LUNA that was being minted on a daily basis.
In more recent updates, the team behind Terra’s stablecoin, UST took to Twitter and pointed out that the surging peg pressure on the stablecoin was paving the way to the extensive dilution of LUNA. Negating the bad debt from the circulation of UST remains a significant hurdle to the platforms. Therefore, focusing on the same, Terra indents to employ Proposal 11164 which reportedly initiates the expansion of the size of the base pool.
This in turn would accelerate the burn rate of UST. Following this, the process would then aid the deflation of on-chain spreads.
Albeit these efforts, TFL would reportedly carry out three major emergency actions. Elaborating on the same, Terra tweeted,
Furthermore, it was revealed that the TFL was still on the lookout for the “best avenue to burn the remainder of its UST holdings.”
Here’s how much UST will bid adieu
As seen in its second course of emergency action, TFL would burn 371 million UST that currently resides on the Ethereum blockchain. The proposal further revealed that a total of 1.39 billion UST which is about 11 percent of the asset’s liabilities would be eliminated.
Along with this, TFL has reportedly staked a whopping 240 million LUNA. The platform did so in order to protect the network from potential attacks.
Additionally, the aforementioned actions are expected to minimize the network’s bad debt. Elaborating on the same, the platform wrote,
“Expelling the system’s bad debt with the above items should help restore the on-chain swap spreads to a meaningful level where the peg pressure on UST is significantly alleviated. Once the new base pool proposal passes, this will also expedite the process.”