Giving a dynamic arbitrage incentive could temporarily save both LUNA and UST.
I think if we slow down LUNA mint rate, without compromising UST’s progress to re-peg, we could slow down inflation of LUNA.
Instead of 1UST = 1USD worth of Terra, we could give a variable incentive, such that 1UST = currentPriceInUsd + variableIncentive worth of Terra.
Assume that variableIncentive is 0.2,
If UST is priced at 0.1, arbs will be able to mint 0.3 usd worth of Terra. This would reduce minted Terra by 70% (roughly) while maintaining same amount of UST burnt.
and if (1 - UST’s currentPriceInUsd) < variableIncentive, 1UST = 1USD worth of Terra.
Wouldn’t this help slow down the mint rate of LUNA hence slow down it’s inflation hence less panic, without slowing down UST’s re-peg?