Save luna & ust with a fair proposal

What I propose is simple & fair & no/min arguments:

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=== (1) SAVE LUNA ===

Simply let the open market decide the path for the current LUNA, don’t kill it, let it run.

Upgrade the smart contract for this LUNA to be only a governance token & with a burn mechanism similar to Shiba Inu (Because LUNA has become a memecoin now, so work like a memecoin).

No more minting is allowed, the burning process will reduce the scarcity over time, making the price goes up naturally by market supply/demand.

No more “linked” to UST peg-related stuff.

This way, LUNA is saved from selling pressure, saved from future dumping again.

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=== (2) RECOVER YOUR LOSSES ===

For those who lose from buying at a high price before the crash, just buy them back, it’s damn cheap now, you just need $50 or so, why bother asking for a new coin disbursement? and you can easily get 10-fold in a short time, and get your capital back.

See the chart on FTX, it went down to 0.00000100 just half day ago, and now it’s trading at 0.00001900. This is about 19-fold already! And with the new smart contract upgraded and a new FOMO rush will most probably occur, it’ll easily make another 10-fold, just look at dogecoin or Shiba Inu coin, how they make it to today’s price?

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=== (3) SAVE UST ===

All right, this part might be a bit tricky, and I believe there are several solutions for stablecoin.

As for me, I’m thinking simple and practical. Just look at other stablecoin, why they don’t have depeg problems like UST (which happened twice)? Can we all put down our ego for a second, I understand the algorithm design is genius and “wow” in the first place but it still failed. Can we just don’t use the algorithm thing? Does USDT have such a mechanism? I don’t think so. Do most of the other stablecoin has it? Most don’t, they simply just back it by USD, simple. Why make it so complicated when a simple way works well?

I definitely don’t have the intelligence to come up with an excellent solution, but start thinking from my perspective, and make it simple & stable, no need to come up with a complex algorithm to shill how smart you are, if a simple solution can work, then simple it is.

Currently, this is what I can come up with:

step 1) Start gathering real USD for backing UST. (of course not just this, you’ll need to figure out what else you can do to strengthen the peg, but don’t use the same failed algorithm anymore)

step 2) Implement the “Recovery Staking” plan. Which are you’ll be able to get back actual USD1.00 as return from the staking.

For example:

You bought UST10,000 at a discounted price of $0.80, so your true cost is $8,000, then you put it into this recovery plan, the return schedule looks like this:

starting rate: $0.82
scaling deviation: 1.3524x

Based on the purchase cost rate at $0.80 example:
Stake 4 months get rate of UST1 = USD0.8200 (ROI $200 = 7.50% pa)
Stake 8 months get rate of UST1 = USD0.8470 (ROI $470 = 8.82% pa)
Stake 12 months get rate of UST1 = USD0.8836 (ROI $836 = 10.45% pa)
Stake 17 months get rate of UST1 = USD0.9330 (ROI $1330 = 11.74% pa)
Stake 24 months get rate of UST1 = USD1.0000 (ROI $2000 = 12.50% pa)
(we need to do more calculations to find out the best period & rates)

so if you want to guarantee to receive back USD1.00 value for each UST1, then you’ll need to stake it for 24 months, no extra earnings, no LUNA, no extra minted UST, nothing more than getting back the real USD following the rates above.

Of course, there is more in-depth design needed before the real use.

Does Terra lose money giving USD1.00 back? No, because it is backed by USD1 = UST1, it’s just giving back the holder money, without paying interest to the holder, with a period of 24 months, claiming full at the end of the staking period. So technically Terra has 24 months to use that USD reserve to generate extra income such as bank FD interest, & etc.

Benefits:

  • The recovery staking plan’s guarantee will attract conservative investors to grab any cheap UST in the open market & convert it into fixed-rate USD
  • There’s no need to mint new UST in any process, making UST scarce. And also without extra USD backing, Terra cannot mint more UST at will.
  • The locked time period will give the open market time to recover the 1.00 peg because if more ppl go for recovery staking, there’s lesser UST circulation, making it hard to drop in price.

step 3) Recalculate existing UST in circulation & the number of USD reserves backed, we need to make sure there’s enough USD for each UST backing.

In case there’s too much UST currently in circulation, & you can’t get enough USD funding to cover all UST, don’t worry, we set a max limit for each Staking for time being so it can cover enough USD, we’ll buy time to regain the community’s confidence in UST, so there will be more USD funding pouring in the reserves to back the UST.

Or maybe we can open up this to the public for the USD Staking plan, so Terra won’t have the pressure to find USD funding by themselves alone.

step 4) Restart the UST network & market, but set a grace period of 30 days before anyone can start applying for Recovery Staking Plan, so this grace period will have enough time for the market to FOMO & grab all those cheap UST currently in the market & also allow the market to stabilize.

In the end, we don’t need to re-create a new coin, just upgrade the current LUNA & UST, everyone who holds the LUNA & UST now has no need to fear being ditched by the Terra team who planned to just save some people. Those who panic sold them with loss, can buy back now at a super cheap price, which is easily DCA’d (dollar-cost-averaged), and get your capital back in a few months’ time.

This post is just the general concept, more work needs to be done to perfect & finalize it, so please don’t scold me or question me for missing this and missing that, we can discuss and come up with better & improved versions, let’s all help out in a positive way.

Hope this helps. Thank you.

Question:
Who’s USD that is going to give away to the recovery staker? Then how do we cover the same USD back to the owner?

So let’s say we do have a USD Staking/funding pool to provide liquidity to this recovery staking plan, you’re the USD staker, you want the money back (unstake), where does the money comes from (after it is paid/going-to-be-paid to the recovery staker)?

The recovery staking has a timeframe of 4 to 24 months.

  1. UST holder stake for recovery staking plan, so the UST has been transferred to the Terra’s recovery pool.

  2. Terra can immediately sell it for USD1 back to the market (I believe there’ll be many ways to achieve this), the main requirement is that Terra has to get back USD with a rate higher than the payout rate). So the required return payout is secured & maybe Terra is still able to make a profit in this process.

For example,

If someone stakes UST10,000 for the 12 months plan, i.e USD0.8836 return rate. Meaning Terra has to prepare a total of USD8,836 at the end of its 12 months period to pay to the staker. So in this 12 months’ time, Terra has enough time to resell the UST10,000 back into the market at a higher rate such as 0.90, so Terra will receive USD9,000 and it generates a profit of USD164. This profit can be distributed to the USD Stakers.