Proposer – Terraform Labs
Disclaimer – I am employed by TFL.
In addition to Prop 133,134 to burn the Terra Community Pool, TFL is further proposing to permanently burn the remainder of the SDT Stability Reserve by sending the current 11,003,512 SDT in the TFL wallet to a burn address. The illiquid portions of the remaining 700 million SDT to be vested over the next 7 years will be burned as they unlock – sent to the same burn address.
The SDT Stability Reserve was initially created in the genesis block of Columbus-1 mainnet to bootstrap the creation of Terra stablecoins while neither Terra nor Luna assets had sufficient liquidity. As you may recall, minting Terra stablecoins uses a “virtual amm” pool against Luna, where the size of the pool (and consequently the exchange costs) are proportional to the off-chain liquidity of Luna. Therefore, the SDT reserve provided a valuable means for KRT and UST to be created in the early days of the network without egregious slippage, allowing early use cases like Chai and swap pools across Terra and Ethereum to be born.
With Luna one of the largest and most liquid assets in crypto, Terra needs the SDT reserve no longer - hence, TFL moves that the balance of the entire SDT reserve be burnt.
Notably, burning the locked 700 million SDT at once would require software changes only possible with a major network upgrade, meaning that we could technically burn the remaining SDT as part of an upcoming software upgrade to the Terra protocol. Such an action would be at the discretion of the community from a separate proposal.
For now, this proposal will execute the following items should it pass.
Total SDT – 1 billion SDT
Total SDT to be burned – 711,003,512 SDT
Total SDT to be burned immediately if this proposal passes – 11,003,512 SDT
Total SDT to be burned over 7 years according to the vesting schedule if this proposal passes – 700 million SDT
TFL Foundation wallet address holding the SDT:
Execution Plan & Schedule
If this proposal passes, the following events will be executed in sequence:
- Send 11,003,512 SDT from the TFL Foundation wallet to the burn address.
- Send 100 million SDT per year on 04/23 at 23:00:00-07:00 ~ 2022.05.23 23:00:00-07:00 UTC to the burn address for the next 7 years. The next 100 million SDT release is on 04/23/2022 at 23:00:00-07:00 ~ 2022.05.23 23:00:00-07:00 UTC.
For context on vesting unlocks, 100 million SDT (10% of the total) is vested every year at the same time, beginning on 04/23/2019 and most recently on 04/23/2021.
You can find the scheduled vesting for the remaining 700 million SDT in the link below under the “Vesting” tab:
Please allow for open discussion in the comments below.
This proposal will be initiated as an on-chain vote within 48 hours.