Luna Classic (LUNC), the native token that powers the Terra Classic blockchain is looking to make a major comeback. The original UST stablecoin lost its peg to the dollar and saw the collapse of the UST (now USTC) stablecoin and Terra (LUNA) (now LUNC) token.
With billions of dollars in losses, the Terra Community has been working to restore its former ecosystem. The community expects the USTC to be re-pegged while intensified Terra Luna Classic (LUNC) burns would help sustain its liquidity.
Repegging USTC to $1
Re-pegging the USTC remains one of the biggest goals of the community. The idea of re-pegging USTC was birthed in October 2022.
On Feb 3, 2023, the community passed a proposal for the re-pegging of USTC. The proposer, Duncan Day, says that the plan will re-peg the defunct algorithmic stablecoin on a code and consensus level. Supporters of the re-pegging believe that not only will it help holders recover lost value, but it will also significantly increase the rate of LUNC burns using original algorithmic peg mechanisms.
Although challenging, re-pegging promises value recovery all around for community members.
FAQs on USTC Re-Pegging
Luna Classic developer, Duncan Day, responded to frequently asked questions about the USTC re-pegging. Here’s what you need to know.
Cost to Repeg
The cost to re-peg can be obtained by subtracting the market capitalization of the USTC from the fully circulating supply without including development costs.
How long will it take?
The prediction time for the completion of the project is Q1 of 2022. “So before the next BTC halving in March 2024 – May 2024.” wrote Duncan.
“This date isn’t guaranteed. The software can run into bugs which delay the target date if they are pressing.”
Duncan Day
However other members of the Terra Luna Classic community would like the USTC re-peg done immediately.
How many people would have to work on it?
Duncan shared that there isn’t a specific number of people decided yet. However, he noted that the more workers, the faster the job gets done.
“Obviously it gets done faster with more people, especially those who are skilled.”
Duncan Day
Duncan also noted that he works by himself most of the time with the help of a few volunteers.
He noted however that he has the necessary skills to digest information from multiple sources and translate it across teams.
He added that the LUNC recovery is a group effort and that the thesis of decentralization rings true there.
How does it affect LUNC and its burning?
According to Duncan, the natural outlet for USTC arbitrage is LUNC in the context of Terra Classic. He said users can buy and stake but they need a real place to spend their money.
On the burning of Lunc, he noted that if market swaps are turned back on, it will burn more LUNC than possible with the tax because the burn is baked into the functionality.
What are the chances of losing the peg once re-pegged?
Responding to the question, Duncan said that there is a 100% chance of another de-peg.
“This is not a “hard peg”, it’s a “soft peg”. The ‘target’ is $1.00, but there’s nothing that guarantees it intrinsically.”
Duncan Day
He added that during testing periods, they may experience high volatility, up to, and exceeding, $1.00.
Will there be any changes to the tax?
The tax on market swaps is dependent on the input value, the same as the burning tax as-is.
Duncan said that there is a possibility they will test the function with the current tax implementation (on double-taxation.) If it works, they will remove the government handler tax first.
Does this have an effect on the community pool being replenished?
The community pool can only be replenished through re-minting. The community will therefore rely on transaction fees or manual sends.
How will this affect all other forex currencies on LUNC?
All markets on LUNC are separated. By re-enabling the market swaps as-is, the community will return to linking all markets.