Backers of Terra have approved a plan to revive the failed Luna cryptocurrency, but without the controversial stablecoin that triggered its $60 billion U.S. collapse.
“With overwhelming support, the Terra ecosystem has voted to pass Proposal 1623, calling for the genesis of a new blockchain and the preservation of our community,” reads a post on Terra’s official Twitter (TWTR) account.
The proposal would lead to the creation of a new blockchain and revival of Terra’s associated Luna digital token, which is now worthless after investors dumped the cryptocurrency in the digital equivalent of a run on a bank.
Earlier this month, TerraUSD (UST), a so-called stablecoin, plunged below its intended $1 peg to the American dollar. That led to panic in cryptocurrency markets, with investors dumping its sister token, Luna.
TerraUSD is what’s known as an “algorithmic” stablecoin. Through complex engineering, it was designed to maintain its peg to the U.S. dollar through the creation and destruction of UST and Luna, which, in theory, would help to balance supply and demand.
That’s different from how many major stablecoins, such as Tether, are meant to operate with actual fiat currency held in reserve to support the dollar peg if clients withdraw their funds.
Regulators are becoming concerned, with the U.S. Federal Reserve and European Central Bank calling for urgent regulation of the cryptocurrency market, especially for stablecoins.
At their height, Luna and UST had a combined market value of $60 billion U.S. Under the new proposal, Terra plans to distribute tokens to holders of the old Luna, which will be renamed “Luna classic.”
About 30% of tokens will go to a pool of investors in the Terra community; 35% will go to those who held Luna before its collapse and 10% to pre-collapse UST holders. A further 25% of tokens will be allocated to traders who still own Luna and UST after the crash two weeks ago.
The Terra collapse shook investor confidence in the broader cryptocurrency market, which has collectively lost roughly $600 billion U.S. in value in the past month alone.
