The co-founder of Terra blockchain has pledged his commitment to help in the resolution of the crisis facing Terra community. In a Twitter post published on May 11, Kwon said that the last 72 hours have been a trying one for the community. He added that he has resolved to work with the community members to ensure that the situation is normalized.
Kwon assures the community that the stabilization mechanism which the Luna Guard Foundation is implementing for the stabilization of the Terra stablecoin, UST works. He quoted Pedro Ojeda, the co-founder and project leader of Split Brick, the decentralized real estate empire to buttress his point.
Ojeda has predicted when the UST depeg would end, using a model he called “death spiraling Luna”.
Absorption of Excess UST Supply
Kwon said that the Terra stablecoin is presently trading at half the intended $1 price. He acknowledged that this is a significant deviation, but assured the community that the stabilization process is on course despite some challenges.
He said that:
“The price stabilization mechanism is absorbing UST supply (over 10% of total supply), but the cost of absorbing so much stablecoins at the same time has stretched out the on-chain swap spread to 40%, and Luna price has diminished dramatically absorbing the arbs.”
Kwon added that the first focus of the foundation is the absorption of the excess UST in circulation. He said that there are several propositions on ground to ensure that this objective is actualized.
1/ Dear Terra Community:
— Do Kwon 🌕 (@stablekwon) May 11, 2022
Basepool Increase, PoolRecoveryBlock Reduction
Some of the recommendations include a community proposal to increase the basepool to 100 million SDR from 50 million SDR. The PoolRecoveryBlock will be reduced to 18 from 36. The idea is to boost the minting capacity to $1200 million from $293 million. According to Kwon, this will facilitate a quicker absorption of UST. He said that:
“With the current on-chain spread, peg pressure, and UST burn rate, the supply overhang of UST (i.e., bad debt) should continue to decrease until parity is reached and spreads begin healing.”