In the world of cryptocurrencies, the collapse of the Terra blockchain was undoubtedly a market-shaking event. TerraUSD (UST) lost its peg to the U.S. dollar nearly three weeks ago, triggering a flurry of market turmoil. However, this event also gave rise to new hope - the birth of Terra 2.0 or Luna 2.0. This article will detail Terra’s historic collapse and key information about the upcoming Terra 2.0.
Terra (LUNA) Historic Crash
UST loses its peg: UST, the algorithmic stablecoin on top of the Terra Protocol, is the driving force of its entire ecosystem. However, on May 9, the UST lost its peg to the U.S. dollar. A few days later, it was trading at around $0.30, a staggering 70% below the planned value of $1.
Reason for the crash: Due to the way the algorithm works, traders were able to exchange $1 worth of LUNA for $1 (trading below $1). This design is designed to destroy USTs and limit their supply, which should theoretically increase their value. However, UST never came close to its $1 target due to intense selling pressure.
This allowed resellers to print LUNA in large quantities, creating a massive supply of over 6 trillion LUNA in just a few days. Such rapid supply growth caused the price of LUNA to plummet to $0. The event left a deep mark on crypto history, with the entire Terra ecosystem wiped out in less than a week and billions of dollars wiped from the market.
What is Terra 2.0?
Do Kwon’s Proposal: In order to rebuild the ecosystem, TerraForm Labs CEO Do Kwon proposed a governance proposal for the Terra Luna hard fork. In this proposal, the existing Terra blockchain will be split into two blockchains. The current chain and the new chain will exist at the same time, but operate in different ways.
Do Kwon proposed abandoning the UST stablecoin and creating a new blockchain – Terra 2.0. In the long term, Terra aims to become a community-owned blockchain. The airdrop whitelist will be updated to remove Terra FormLab and Luna Foundation Guard (LFG) from wallet addresses.
Result of hard fork
Based on “Proposal 1623”, the Terra team plans to create a new chain that does not contain algorithmic stablecoins. In short, they will retain Layer 1 technology while avoiding the stablecoin approach that led to the death spiral of LUNA. Ultimately, the Terra community voted in favor of the proposal.
After the hard fork, the old chain will be renamed Terra Classic (LUNC) and the new chain will be called Terra (LUNA). Do Kwon stated that the new Terra will operate without an algorithmic stablecoin.
Terra 2.0 is online!
Online date: May 28th, the new Terra blockchain is finally online! Terraform Labs confirmed on Twitter that Terra has started producing blocks on the newly named “Phoenix-1” mainnet. It launches at 06:00 UTC with a token airdrop for previous LUNA and UST holders.
LUNA 2.0 Airdrop, Token Economics and Distribution: The new LUNA token will have a circulating supply of 1 billion tokens. Once the hard fork is executed, 30% of the new LUNA tokens will be airdropped proportionally to pre- and post-crash LUNA and UST holders.
Eligibility criteria for holders to receive new LUNA tokens
The community pool will receive 30% of the token allocation, with 10% earmarked for developers.
Pre-crash LUNA holders will receive 35% of new tokens.
Pre-crash UST holders will receive 10% of new tokens.
Post-crash LUNA holders will receive 10% of new tokens, including collateral derivatives – 30% of tokens will be unlocked at genesis, with the remaining 70% vesting over two years, with a six-month cliff Expect.
Post-crash UST holders will receive 15% of their tokens – 30% of which will be unlocked at genesis and 70% will vest over two years with a six-month cliff period.
For example, if you had 1,000 LUNA tokens before the hack, you would receive 1,100 new tokens; however, if you purchased LUNA tokens after the hack, you would only receive 0.015 new tokens .
New LUNA Token Distribution
Luna before attack – 1: ~1.1
Before attack aUST – 1: 0.033
Post-attack LUNA – 1: 0.000015
Post-attack UST – 1: 0.013
LUNA 2.0 Price
LUNA 2.0 is rumored to cost $50 at launch, with some rumors speculating the price to be between $30 and $60. Meanwhile, just hours after the new token was launched, its value plummeted by 60%. According to sources, Terra (LUNA) 2.0 is trading between $17 and $18. The price then rose to the $20 level.
If you want to know more about LUNA and LUNC, or for recommendations and advance layout of potential coins, you can contact me at any time.