Updated proposal 1623 has been overwhelmingly accepted
The Terra saga continues after several weeks of turmoil for the community and token holders, culminating in the amended Terra revival proposal 1623 being approved. It will effectively create a new Terra blockchain without the algorithmic UST stablecoin.
The old chain will carry the name Terra Classic, with the token changing to Luna Classic (LUNC), and they named the new chain Terra, with LUNA tokens airdropped to the wallets of those affected by the crash.
The final release of the new Terra Core was unleashed in preparation for the new chain launch on 27 May. The code has also successfully passed an audit by SCV Security. Importantly, LUNA will airdrop to stakers and holders of the old LUNA token, residual UST holders, and essential app developers of Terra Classic. Complete token distribution details can be found in the governance proposal, but to summarize:
● Community pool: 30%
● Pre-attack LUNA holders: 35%
● Pre-attack aUST holders: 10%
● Post-attack LUNA holders: 10%
● Post-attack UST holders: 15%
Interestingly, the community pool will get 30% of the new LUNA tokens in an attempt to kickstart and continue further dapp development on the network. This should also push the number of user wallets and trading volume through LUNA. They removed the Terra Foundation’s wallet from the airdrop whitelist, making Terra a fully community-owned blockchain.
Terra states that holders should be aware that due to technical constraints, it is not possible to include all UST and LUNA holdings on Terra and other chains in the snapshots mentioned. Below is a list of the assets that may not be included:
- UST or LUNA bridged off of Terra
- Users with bridged UST or LUNA who would like to be included in the post-attack snapshot need to bridge back to Terra before the snapshot is taken
- UST or LUNA on Terra protocols that cannot be easily identified
- All protocols listed on DeFi Llama here will be covered, and a few known others
- UST or LUNA on CW3 multi-sig contracts
- Most UST and LUNA in CW3 multi-sig contracts will be accounted for, but there could be edge cases.
What about LUNA price?
Many people were financially hurt when Terra UST and LUNA unraveled over the last few weeks. This airdrop and resurrection of Terra, while going a long way to compensate holders of either UST or LUNA, will not see them made whole or even close. It’s vital to understand what will happen when the new LUNA token arrives and what airdrop receivers should expect from the asset in the short term. Firstly, the total supply of new LUNA is 1 billion.
When eligible wallets receive their tokens, they will already be staked, with holders then applying to unstake them, which takes 21 days. Notably, for the first 21 days, the only liquid LUNA on the market will be the 300 million from the developer allocation. For pre-attack LUNA, only addresses that had less than 10,000 LUNA will get the genesis unlock. That means only 6.45% of LUNA pre-attack is eligible for the genesis unlock. Genesis unlock amounts per category:
- pre-attack LUNA: 6,811,200
- pre-attack aUST: 30,000,000
- post-attack LUNA: 30,000,000
- post-attack UST: 45,000,000
This means the total genesis unlock will be 111,811,200, or around 12% of the total supply. Meaning that Venture Capitalists and whales, who had most of their wealth in LUNA with addresses that had more than 10,000 tokens, will not get anything until their 1-year cliff period is up.
In a nutshell, Terra 2.0 will be 100% community built, owned, and used for the first year. If whales decide to dump LUNA after one year, they would only be selling it at a low rate back to the community and those that believe in 2.0. With only 12% of the total LUNA supply circulating for the first six months, the supply restriction means that the price of LUNA should be good initially. Even more important is that most of that LUNA will remain staked, not sold.
Terra is not out of the woods yet
While the people most affected by the UST and LUNA crash will be very eager to get their hands on any kind of rebate, it raises questions about the chain’s stability moving forward. The crypto space can often draw money-grabbing opportunities, and comments on the Twitter thread suggest that already. Arbitrage traders and those buying LUNA at the bottom that expected a sharp bounce ask if they will get an airdrop. Presumably, the answer is no.
The last few weeks’ events left a nasty taste in many people’s mouths, and trust in Terra and its leader Do Kwon has been shaken to its core. Nevertheless, the brand is recognized, and the community is vital. If only rallying around misery, it’s still a strong lure. Moreover, it provides an excellent foundation to leap. Then there’s the issue of Terra Classic. If whales decide to stay there and conduct business, the new Terra ecosystem may struggle, which is true the other way around. If the Ethereum vs Ethereum Classic debacle can be used as an example, then there will be one clear winner, which may take a little time to reveal itself.
The above does not constitute investment advice. The information given here is purely for informational purposes only. Please exercise due diligence and do your research. The writer holds positions in various cryptocurrencies, including BTC, ETH, and RADAR.