Proposed Recovery Plan (Proposal 1597)

Summary
Proposal to save the Terra blockchain, protocol (and accompanying software), LUNA coin, UST coin, community related projects, community pool and attributed finances, and the governance community, in its current form (and any aspects to which the governance community would be considered having authority over or in, and only to the degree they have authority over or in). This proposal also has an impact on the ability to recover LUNA and UST value over the mid to long term.

Motivation
To strengthen the governance community of LUNA holders, to restore (however slowly) the trust of UST users, and to enable the longevity of the project.

Proposal
Link To Vote:

  • Proposal 1597: Terra Station
    • Note: For some reason the proposals are not showing up in Terra Station > Governance > Voting (with the exception of proposal 1188 and 1164 as of 12:49pm UTC, please use this link to vote and if you like this proposal, please direct others to this link as well to vote)

Essence behind the proposal:
The intent behind this proposal is in no way to diminish Do Kwon or TerraForm Labs work (or this communities appreciation of them), and it is hoped that they may be the ones to carry this community through this transitional time of restoration and recovery of this project. However, if this is not consistent with TerraForm Labs vision, this community (if this proposal should carry), desires to express that we would like to continue and to find the best leadership forward to do that if Do Kwon no longer wishes to lead this project and community toward restoration in its current form (although it will always be recognized that it was only possible because of his and TerraForm Labs hard work and vision).

This proposal recognizes as background:

  • Both LUNA and UST are assets (A) that are tied together. When they cross markets there is a liability (L) and the net result is equity (P). A - L = P.
  • LUNA is the governance coin (and a reserve), UST is the stable coin. Both have value. Both back one another up. The net of both added together are the assets (in addition to any outside reserves that are owned by the DAO governance holding LUNA).
  • Contrary to belief, UST and LUNA are backed by real money - it is the buying power of the money received (or expended) when the coins were / are initially sold (or bought back) (there may be some other forms of monetizing as well - but this is the essential essence).
  • The minting / burning is really just an algorithmic way of moving funds from one supply market to the other in order to bring equity. So, this is real money, both Terra and the DAO will be responsible for this legally. You can not just burn or mint without actual value behind it.
    • Some have asked why the supply of UST keeps growing - people are selling it faster than it is being purchased with LUNA (burned in exchange for mint in LUNA). However, I will say that the market cap is still in the billions (even if the pool size is diluted). This is why the minting process was exaggerated in LUNA, in order to buy back UST to diminish the UST pool size (making it more scarce, and therefore more valuable - and since LUNA was what was mainly being used to do that, it made LUNA less scarce and therefore less valuable). It is supply and demand.
  • The problems have been:
    • the burn / mint rate was hard set rather than set based upon volume of sales / exchanges on the Terra blockchain
    • no automated volume level restrictions on sale of assets (purchase of assets should not be limited)
    • stopped purchases at the time adding buying power to the assets was needed (although I do realize it was to prevent a run on sales and the value of supply and trust level - the protocol should be amended to allow sales to be rate controlled while buying is not). If there is a reason buying would present a problem to the ecosystem, then that supply should be purchased and held in reserve.
    • loaning money from reserves to market makers rather than using it to buy back UST to diminish supply and raise the value (Terra could have done this themselves, or the Governance could have done this)
    • there may have been an emergency plan that the Governance had approved, but if so, it was either did not exist, was not followed well, or it has room for improvement (which is probably true for every emergency plan).
    • throwing in the towel when there is still 3B in market cap for LUNA (it is just diluted right now), and 2B in UST (as of 5/14 at 4:37pm CT). This is more than enough capital to restart this project - new projects would love to have that much capital to start with. Will it be the 40B dollar size it was - no, it has already lost size, and you will need to start where you are at 5B. But, this is more than enough to both save LUNA and UST over the mid term by burning and minting as buying power is still available in LUNA, buying back UST with remaining reserves, and then as UST pool size shrinks, slowly resell UST and covert it to LUNA (by burning and purchasing back LUNA). This is how every single person eventually can regain the value of their LUNA and UST. No bailout plan is going to get your money back with the exception of pennies on the dollar - wouldn’t you rather wait it out and potentially get the whole amount back and have the opportunity for growth? The community can vote on whether they would like a guideline in place for who, such as low income persons or those who had savings account products, are paid back first if there is a desire to provide more immediate help. If not, then something that instead is easy and equally applied to all based on their shares / number of coins (or something else).
  • There is not much difference between the model that Terra used here and the model of most fiat currencies (although in banking, the funds are insured and that is a big difference).
    • Hard currency is better than fiat in that it is actually backed. It is true that the fed backs currency, and that our currency is the currency of the international monetary fund, but even the fed uses dollars, or derivatives of dollars, to partially back up the very dollars they release (which is completely crazy). Our only saving grace is that the US still holds the largest gold reserve, but even it most likely would not have been enough if a similar situation that happened to LUNA / UST was scaled up and attempted on a country wide level or against the NATO states and the international monetary fund. That is why the fed constantly manipulates the fiat system to attempt to keep it in close enough balance, even if it means they devalue money (sadly). The point though for this situation is that the LUNA / UST project was not much different than fiat monetary policy, although it was obviously overextended and did not back the stablecoin with enough reserve value and restrictions to selling under pressure.
  • There is an obligation to those who were sold LUNA / UST as a savings account (that one is a legal liability that I am pretty sure that if you do not recover from will have some serious legal implications - possibly even for governance members, but particularly for the day to day leaders of the DAO governance project).
  • The course was not fundamentally flawed (or at least were no more flawed than fiat monetary policy), but certain specifics mentioned above were (and currently are - and there may be others that I have not mentioned or thought of besides these I admit, but as I see it, these mentioned above are the central ones). The problem now is whether either the current team will re-engage, or the DAO Governance members will take leadership and relieve the current day-to-day team, and place a new day-to-day team in place to re-engage. No amount of rebranding is going to be any easier than just working through this - and it will come with much less legal complications and responsibilities in the near future.

Putting this thing back together is completely doable at this point - without even having further outside funding (you have 5B in market cap, although I do realize that cash on hand is less, between the two tokens, and whatever was not loaned out from reserves), but rather working over the next number of months to minimize the pool sizes, regain trust by restoring the value of the assets (both using the current assets and minimizing the pool sizes of those assets, as well as bringing in new purchases). If you happen to get further outside help - fine. But, you have what you need financial now to do this, and although it will recover on a smaller scale and most likely slower than most would like, it is more than doable. You have a fiduciary legal responsibility to do this from what I am seeing (although I do admit that I am only seeing as an observer and not from the day-to-day leadership team, or those who have been closely tied to the DAO governance since the beginning).

The idea here is to shrink things down to their actual monetary size, and then move from there toward new growth - it still is going to be larger than most other decentralized stable coin projects.

If I were to list the threads that seem most promising at this point they would be:

  • [Proposal] 8 Steps to Save Luna Now - Economic Refactoring Proposal From Industry Professionals
    • In regards to the points I mentioned above that are similar
  • Buy Back and Burn $LUNA
    • In regards to shrinking the pool sizes (although I disagree about UST being done with - at this point they are just diluted pools that need to shrink through equity [purchasing through minting and burning and purchasing through buy backs and either hold in reserve or burn after purchase]). But, minting and burning should not just happen in a way that violates monetary buying power under the token assets - you can’t just burn without purchasing it first, that is essentially devaluing the whole system monetarily, and then you do hit the point of being counter productive and driving away any remaining value.
  • Proposal 1164 or 1169
    • Only as temporary solutions to allow the minting purchasing of UST and burning sale of UST to shrink the pool and provide a smaller supply to enable a larger demand. On a permanent level, these should be based on volume of trade, and that trade should be the UST to LUNA (and vice versa) on the Terra chain. Do not worry about arbitrage on the exchanges, you can apply a volume control of exchange on your own block chain for when sales / exchanges are too much volume that could create a run and quick loss of confidence - you can slow these down to a reasonable pace on your own block chain (let traders on the exchanges do what they would like).
  • Terra Ecosystem Revival Plan
    • I would completely disagree, but I can sympathize with how difficult this must be for Do Kwon both as someone who is probably very tired right now after this week, and someone who is watching a good portion of the work he has done feel lost as people continue to say it’s over.

Action Items:

  • That Do Kwon and TerraForm Labs position be one that looks to save the Terra blockchain, protocol (and accompanying software), LUNA coin, UST coin, community related projects, community pool and attributed finances, and the governance community, in its current form (and any aspects to which the governance community would be considered having authority over or in, and only to the degree they have authority over or in). If there is no formal statement to the governance community after 5 days from the exact time of passage (should this proposal should carry), then it will be assumed that Do Kwon and TerraForm Labs do not see this as in line with their vision for the project, and the governance community may take whatever action, including legal, to retain funds and ability for day-to-day operations of the project that the governance community would be considered having authority over or in.
    • That if this not be in line with the vision of Do Kwon and/or TerraForm Labs, that this community would agree to take over the Terra blockchain, protocol (and accompanying software), LUNA coin, UST coin, community related projects, community pool and attributed finances (and any aspects to which the governance community would be considered having authority over or in, and only to the degree they have authority over or in).
    • That if the vision of Do Kwon and/or TerraForm Labs is not in line with the above subpoint, that the top 5 stakeholders in LUNA, which shall include at least 2 validators, an 2 persons who are not affiliated with TerraForm Labs, it’s officers, board members, or employees, be selected to provide a slate of candidates, that shall be paid modest fees for their service, from the community pool, to the community along with the summary amount paid for their services. Each of these 5, separately, shall list the candidates in the https://agora.terra.money system. These shall include (at minimum):
      • A lead economist
      • A lead financial advisor
      • A lead technical officer
      • Legal counsel
      • A bookkeeper, or auditing firm, or relevant service (who shall be a cosigner on any financial transactions over $400)
        • Two of the four roles can be shared by the same person (except that the cosigners of financial transactions shall be two or more separate people).
    • In the absence of any leadership from this project, the temporary day-to-day operation will devolve to one of the top 5 stakeholders in LUNA (or their representative), to be voted on by the community. This person can also be removed by the governance community if it is determined that they are not serving the best interests of the governance community. The modest amount that they would be paid for their services from the community pool would need to be reported to the community in summary. They would also be able, during their temporary time in day-to-day leadership, to represent any legal matters on the part of the governance community.
    • Note: It is to be iterated again, that although this item is a strong signal that this community (if this proposal carry) is not willing to abandon this project in its current form, meaning both LUNA and UST in their current version, although with any necessary changes for financial soundness, but not a rebrand, not with principles that would violate fiduciary responsibility of the project, or financial value. It is meant to be a strong signal that we would rather go forward in an attempt to restore value and trust to LUNA and UST holders (no matter how long that may take). It is also our intent to continue forward with current leadership to the degree that that leadership has the same vision, and to the degree that this governing community has legal recourse to do so (if this proposal should carry).
  • That the person, or persons, in charge of day-to-day operations shall communicate in a reasonable amount of time. In emergency, and/or crisis situations, a reasonable amount of time is at least once per a day during business days.
  • That this governing community recognizes that we feel an obligation to those who were sold LUNA / UST as a savings account, to do all that can be done, no matter how long it takes, for this project to restore at least the value of LUNA and or UST to its previous level of value (that would be the value on 5/8/2022).
    • The day-to-day leadership shall provide a comprehensive review and potential plan to determine if the project can feasibly provide a mid term to long term recovery (no longer than 5 years) from monetization, or other sources, while still providing health to the project (since a healthy project is the greatest single factor to a mid to long term recovery of LUNA and UST value, thereby in and of itself recovering value). If a review shows that a plan can be made that could give greater value to recovery, than the health of the project alone would provide, to detail the plan to be presented to the governance community for a vote. This study and plan should be done within 3 - 6 months from the date of this proposal (if it should carry).
  • That this project shall at the earliest possible availability, as would be considered reasonably possible, provide a diversified store of financial asset instruments to be used in reserve for UST (and any future stable coin projects), and that these reserves be adequate for catastrophic failure.
  • That LUNA continue to be honored as the coin whose holders make up the governance membership.
  • That an emergency plan be drawn up and reviewed every 6 months and presented to the membership for vote that deals with, at minimum, how the project will deal with financial pressure. This shall be specific, and where the white paper is not specific it shall complement it with further details ( https://assets.website-files.com/611153e7af981472d8da199c/618b02d13e938ae1f8ad1e45_Terra_White_paper.pdf ). If a vote fails to receive majority or quorem, the previous emergency plan shall remain in effect. No plan may go into effect, even if it passes, that shall violate fiduciary responsibility (in which case the previously accepted plan continues to prevail).
  • The reserve levels, and what forms they take in terms of financial instruments, shall be published from time to time to the governance community, and at maximum made public in the summary form, at least once every 6 months.
    • That reserve levels always keep enough liquidity on hand, or at least available, or that is backed by insurance (where available), to cover a full catastrophic disaster of either UST or LUNA (as soon as reasonably possible under the circumstances). It is recognized that this could be a long period of time and that recovery of value in LUNA and UST at this point is a main goal.
  • That it is recognized that pools of LUNA and UST are diluted, and although representing a market cap of around 5B combined, that shrinking the amount of LUNA and UST in circulation, in a manner that does not disregard the financial ownership, buying power, or value of each respective coin, is a priority (as far as it is reasonable and responsible).
    • That if either Proposal 1164 or 1169 does not pass, that the plan that is deemed by the community with the highest vote shall be placed into effect.
    • That the protocol be updated so that the burn / mint rate between LUNA and UST be adjusted so that it responds to volume financial pressure of coin sales / exchange between coins on the Terra block chain (including bridging transactions), rather than be hard set. Once this item is done, it should replace Proposal 1164 and 1169 (whichever one was deemed by the community with the highest vote to be temporarily placed into effect).
  • That the protocol be adjusted so that it never restrict purchases of LUNA or UST through the Terra blockchain, but that it does respond to volume pressure to limit sales so that it restricts the rate of sales (and the higher the volume the greater the time restriction) to help limit a run that would negatively impact the reserve and assets on hand for the project, or that would erode trust level.
    • If day-to-day leadership feels that there is ever a time that it would be harmful to the Terra ecosystem, that the governmental communities’ desire is (should this proposal carry) to see the appropriate amount of financial supply of LUNA or UST purchased and held in reserve.
  • That any specific guidelines, if any, regarding payment, or repayment, of LUNA or UST be made, or approved, by the governmental community, and in a manner that helps restore the project, as well as helps meet the fiduciary responsibilities of the project - since we recognize that restoring the project in full, over time, has the greatest potential for investors, community members, savers, and others to recover funds.

Recognition

  • That the community (if this resolution should pass - and probably many even if it does not), would like to recognize all the hard work that Do Kwon and TerraForm Labs have done, all the stress they have endured this past week, and all the efforts they have attempted to try to protect the project in its current form.
  • That the community (if this resolution should pass - and probably many even if it does not), would like to recognize those who have gone through difficulties, financial disaster, and real life consequences that this situation has caused for many who invested as investors, and others who opened savings accounts backed by LUNA and/or UST. It has been a difficult time (and at least I can speak for myself in saying that I am praying for you all).

Finalized Proposal (Voting Is Open) - 5/18/2022 at 12:55pm UTC Time

  • There are also a few other proposals out there that have merit - so make sure to read through them each.
15 Likes

One of the better proposals put forward amongst the plethora @aeuser999

1 Like

UST is not an asset but LUNA is. UST is backed by LUNA, in other words UST is just a derivative made out of LUNA.

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Hi @MagicalTux ,

An asset is something that is considered property. It can be positive or negative (for instance having a building that has intrinsic value, but needs more repairs than it is worth would be a negative asset). For this reason property, whether real, personal, or intangible, including currency is considered an asset. Normally, if you pay taxes on it, it is an asset. Since cryptocurrency is normally considered intangible property as a commodity, a security if it is an ICO, and since El Salvador has officially adopted Bitcoin, that cryptocurrency can now be considered either as intangible property or foreign currency. Both LUNA and UST fit in one of each of these categories, they therefore are assets.

A liability is something a person or company owes such as a bill, debt, and expenses. They also can be either negative or positive. For instance, if you received a discount or refund on a bill, it would be considered a negative liability.

Equity is the difference between an asset and a liability.

So the liability happens at the point of sale of the assets between LUNA and UST in exchange for one another (since at that point you owe something, and that debt is the liability, which is paid with an asset). Since the community pool consists of both assets, I believe, and the pegging mechanism uses a buying and selling of sorts between the two cryptocurrencies in order to peg UST at a specific monetary value, the place where value may enter or consider both pools would be equity (the net value between them), even if that equity in a perfect world would be $0 (which it rarely is).

The formula is Asset (A) - Liability (L) = Equity (P).

I hope that helps out to see why I mentioned that point (which was mentioned actually as a point from my comment in 8 Steps to Save Luna now - Economic Refactoring Proposal from industry professionals , since I reused part of my comment from there). I did not disagree that LUNA was the governance coin, and that it was primarily the reserve, but in monetary policy if you have a reserve, you can extend it (which pours currency onto the market but diminishes the buying power that underlies that currency - one economist called it a way of taxing people without ever having to go through Congress) and you can retract it (which makes currency more scarce and enables the demand to become higher and the supply to gain in value). Both are needed in a reserve system. In the same way, in this reserve system, both LUNA and UST backup the value of one another, and they interplay off of each other’s value - even though if it works well, the community reserve LUNA would always be contracting in supply when UST gets to high in value, and LUNA would be extended in supply when UST gets too low in value (one is always buying / trading with the other to keep UST pegged, looking for that perfect, and difficult to maintain, balance).

That is why I mentioned the issue about assets, liability, and equity. I hope that helps out a little bit.

I hope you have a great weekend :slight_smile:

2 Likes

liability happens at the point of sale of the assets between LUNA and UST in exchange for one another (since at that point you owe something).

I agree to that statement, however this scenario is different. How do you explain minting trillions of LUNA to dilute existing holders? Forced sell of assets owned by public?

Hi @MagicalTux ,

I agree to that statement, however this scenario is different. How do you explain minting trillions of LUNA to dilute existing holders? Forced sell of assets owned by public?

What was happening is that they were using minting as a sort of buying UST for LUNA (it extends LUNA and therefore dilutes the value, in exchange for the value of UST, which it then burns so that the supply of UST contracted making there now less UST in circulation). Think of it this way, when you get paid, your employeer “mints” money to your wallet, and in exchange they bought your service which includes time that was “burnt”. To be fiscally responsible, they must not mint more value than you burn time to provide service, just like your employeer should not take more of your time in work than you agreed upon (and vice versa), otherwise the actual value is not balanced. For a market, it will eventually feel that imbalance, and when you are always trying to keep the pendulum from swinging, it will eventually swing.

In Terra’s case, the pendulum swung UST lower in price, and they needed to get some of it off the market to lessen its supply and thereby raise its demand (value). The problem was that someone came in and dumped a bunch of UST into circulation that was not previously in circulation on the market (rather than using an OTC, or for whatever reason they did that, and Terra appears not have been keeping the reserve value quite as balanced as it should have either). It was a large amount of money in UST, and they could not equalize it quickly enough because the mint/burn rate was too slow, but they needed to get the UST supply down and fast. But, they have to keep the fiscal values equal, they can’t just cook the books (without ending up in court or jail on one hand, or having the market correct in a way that would show their imbalance on the other). Kind of like when a teenager that does not have a job, and you pay a few dollars a week for chores shows up with $1000 in their pocket, and a sheepish look on their face when you ask them about it. The mint / burn rate is meant to be a balancing act financially as a reserve system.

In addition, the overextended reserve worked for Terra ok while the pendulum only needed minor corrections, but when the supply was dumped, Terra did not appear to have had enough buying power on hand in terms of LUNA, UST in reserve (not on the market), and in Bitcoin, so that made the problem even more difficult, and harder felt on LUNA. There is still value in LUNA, but it has way too much now in circulation, which is why it went to fractions of a cent for 1 LUNA. If they are able to contract the LUNA market, and work to either get more buying power into one of the two assets through outside purchases or funding, then the LUNA market can contract once the surplus UST has been purchased and burned (or at lest put into store off the market). This is what was needed to bring the two back into balance financially.

On the public sale aspect - they most likely did not publicly force a sale as much as they dilute the supply through minting. Here is an example. You look at Bitcoin and it looks like it is all erratic (and to be honest, there are times it is), and you look at your dollar bill in your pocket and it is always the same consistent dollar bill. But, imagine that Bitcoin was the currency, and the dollar was what you were buying and selling, the chart would look pretty much the same erratic way. That is because when the Fed puts money on the market, it actually devalues the buying power in your dollar (and if they pull money it increases the buying power), but you look at your dollar in your pocket and it still seems like it is the same old dollar, until you go to use it and notice things are all the sudden twice as expensive. The total market value is still the same, but the supply was what grew, causing each dollar to be less valuable. If it moves into hyper inflation, you can have the situation where money becomes more valuable as paper than any buying power underneath. This is similar to what happen in LUNA, you still held your LUNA, but the buying power was siphoned off in order to provide enough buying power to help bring UST into balance though minting and burning. By diluting the market through minting, it diluted the value of each individual LUNA, and they were able to use that in order to purchase UST and get it off the market to try to raise its price. But if the LUNA supply is contracted, and the unpurchased supply is removed (either burnt of pulled off the market and kept in reserve), then the individual price of each LUNA will raise since the supply is less (at least from the market’s viewpoint and its impact on the market), and now the demand (value) will become greater.

Hopefully that helps a little bit, and that you have a great day today :slight_smile:

3 Likes

Thank you @aeuser99 for taking the time for this proposal.
I really hope @dokwon and Terra team follow up on it very quickly.

In my view this is a sound proposal to restart the whole terra project with strong foundations.

I would appreciate if @aeuser999, @dokwon, or anyone from the community can can provide some hard data or a solid outline concerning the feasibility of restoring the project to its previous value before depeg.

Is it not an act of theft? Once you sell an asset to the public (LUNA), the owner of the asset is the person who bought it. But you mint trillions of coins to take away his money. Don’t you think this a financial fraud?

For example, Terra owned BTC as reserve so it’s their obligation to sell that asset when needed. But regarding LUNA, the asset was being sold to the public so it’s illegal to dilute assets that you have already sold in the market.

And what is your opinion about this?

2 Likes

The plan is good but I also propose to use LUNA as the currency within the Terra blockchain and look to bail out UST Holders over time. We must come to the conclusion that UST was a failed project and cannot be used again further.

Even if there is a UST V2 or whatever name. No one ever is going to use it.

1 Like

Thats why remdy fee is in proposal to help these people.

UST was a unique driver for Terra market cap.

As highlighted by @aeuser999 and also @dokwon, there are several forms to maintain stability of UST: overcollateralization, keep control over the growth of its market cap, have liquidity for rapid deployment, build different structures for UST lockups/interests (to prevent dumping), etc…

That was only because of their unsustainable 20% APR offer. If not very few would use UST in the first place and now after this incident it’s next to impossible that UST will attract any investor at all no matter what changes are being made.

@dokwon and Terra team need act quickly to restore trust…

4 Likes

Good idea, but 3% tax might prevent people from trading luna, thus, slowing the process of recovery, isn’t it?

You are not the first person to notice that connection. The Fed has been doing it for years, most of the countries of the world now use a Fiat system, and even when we were on the gold standard it was most likely a little cooked, at least at the end, since the equal sign between the ounce of gold and the dollars buying power should have meant that there would be no arbitrage between the gold market and the gold desk where you could turn your money in exchange for gold. Countries began to buy our currency since it was as good as gold at the time, but France noticed something, they noticed they could turn it in, get the gold, and make arbitrage on the gold market (showing it had become artificially priced). They pulled the trigger, and President Nixon shut down the gold standard to prevent a run on gold. I will say that once you really realize how economics works, it does leave a sense of feeling cheated, particularly for fiat systems.

To be fair though, the market manipulation is used to attempt to keep things in balance in a fiat system. However, this is why people look for hedges, such as gold, and it is why Bitcoin’s hard currency monetary system appeals as a hedge, to prevent times when buying power is about to, or is becoming, diluted (they can transfer into something that is less affected by the loss of buying power).

For the purpose of LUNA, it is difficult to tell since it was always recognized that it was a financial investment, that it would be used as a type of reserve in tandem with UST to keep UST in balance. No one ever thinks that the manipulation will need to be that bad, but that is why you need to be careful of monetary policy (and each cryptocurrency, like each government, has their own monetary policies - some soft, some hard). LUNA is a soft currency, there is not absolute ceiling to supply, and they have the ability to mint in order to keep UST pegged (although this is why they must also burn UST when they mint LUNA - to keep the finances in balance with what is on hand, otherwise, yes it would be financially inappropriate).

At the same time, most ICO’s use their coins to raise funds, and once you have a LUNA, you are part of the governance community. I am not sure how South Korea’s laws run in this area, and DAO’s are legally murky as to whether they are personhood entities, but in the U.S. the SEC has definitely questioned whether LUNA is an ICO (similar to stock, and if that is the case they would see you as someone who has a legal right to ownership or profits in the company, or in this case governance community of the project). This in turn means that the agreement around what an investor is agreeing to when they purchase the coin may be a little different than purchasing a non ICO. Although they have made their model clear to investors through the white paper, I do agree that diluting the assets would be problematic, but a stock issuing entity is allowed to reissue stock based on company value and the reserve of the community pool is the projects value (similar to stocks losing value as a company loses financial traction). At the same time, I believe that TerraForm Labs has denied, in their view, that the coin is an ICO for SEC purposes (although I think more of the issue at hand was a jurisdictional issue).

On the BTC, there is probably a distinction between the Foundation’s legal entity, TerraForm Labs, and the governance community - that would be my guess. If so, the Foundation may have control over the BTC (although I am not sure about it, or the legal relationship between each of these). If the Foundation is its own entity, then they would be bound by whatever obligations they have signed with TerraForm Labs, or with the governance community. I am not sure how much Bitcoin they have used to alleviate things, but I did read that they loaned it out to market makers (at least partially), so it is probably not cash on hand any longer. I believe, at least partially, it was in an attempt to get UST supply off the market in lessening the supply circulation (but I am a little cloudy on the details).

Fiscally you are correct that they do have a fiduciary responsibility. I do think one area that is concerning legally, particularly depending on how they handle this situation, are those that used their savings products. These may not have been people who have understood the financial risks, since they may very well have attributed to the saving product the same security as a bank (such as insurance backed here in the US).

That was a pretty thought provoking question - I may have to think about some aspects of that question further.

2 Likes

Some ideas from: https://agora.terra.money/t/proposal-global-approach-and-communication-plan/15346

  • Set up a communication unit:
    · Tweets every 2 hours on the progress (even if it’s just to say: “we are moving forward”
    · KFG or Do Kwon must make a statement on the situation tomorrow at the latest
    · Relaying elements of language: “we have been attacked by a third party”
    · Relay elements on the state of cash and / or available liquidities
    · Reply to all influencers FUDERS

@aeuser999, can we add a communication statement in the proposal

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Your proposal is relevant, i hope it will be accepted

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What I find disturbing is that they define LUNA as the reserve asset for UST.

Reserve asset should be something that they hold in reserve like BTC. Once you sell that reserve asset it’s no longer a reserve asset… to dilute people and taking away value from what been sold to them is a clear crime.

We need better, a lot better, communication from the team as to what the heck they are doing.

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