Hopefully this gets reposted because this deserves serious consideration.
I also wanted to add some points to the “Mistake: Save UST, dump LUNA policy” section from the technical/blockchain perspective:
LUNA cannot be rapidly ‘dumped’ without serious risk to Terra blockchain’s security. LUNA is the network token used in the PoS consensus. Rapid hyperinflation of LUNA in the retail market creates a situation where a nefarious actor could obtain enough LUNA relatively inexpensively to take over the network. When this was realized today, a patch was deployed to temporarily shut down delegation, but shutting down delegation is obviously no long term solution. LUNA represents mining power on the blockchain & voting power on governance… infinitely minting it at such a rapid rate dilutes the power individuals who have been participating in the governance and protocol in a positive way.
Additionally, stable demand for mining is required to promote the stability of the blockchain. To achieve this, luna rewards miners through transaction fees (a percentage of luna back) and seniorage (burning luna to increase mining power).
A miners profit in a given time is calculated as:
P(t) = TotalRewards(t)/LunaSupply(t) - UnitMiningCost(t)
Luna supply increases and total fees decrease when the economy shrinks, meaning unit mining rewards tend to move strongly in the direction of economy, up or down, and by extension that applies to mining demand. To maintain stable demand on the long term, the protocol uses transaction fees and the rate of Luna burn as levers to oppose changes in unit mining rewards.
Right now, unit mining rewards are decreasing and, therefore, the protocol should be countering this by increasing fees & increasing the Luna burn. However, the fee increase is capped at 1%, and the amount of luna being minted makes it so that the cap could be reached before the luna supply stops increasing. Seniorage (luna burning) only occurs when luna is converted into ust. The de-pegging of ust has put a lot of downward pressure on luna (ust → txns), and has extremely alleviated demand pressure on the reverse transaction (luna → ust) meaning there decreased opportunity for seniorage.
Hence, the ‘dump Luna’ mentality deters the effectiveness of the protocol levers that prevent the mining rewards from moving in the direction of economy… this translates into mining demand moving in the direction of the economy (down), and mining demand is the core requirement for the security and stability of the blockchain.
UST can’t exist without a blockchain to function on. There is no blockchain if miners are not being properly compensated to process the transactions, and a blockchain that is at high risk of a security failure is not one that people transact nor build upon. There is no real choice of ‘saving UST’ at the expense of Luna because without Luna there is no UST. But shifting the focus to ‘saving’ Luna will at least save the blockchain and preserve the potential to revive UST down the road.