Terra Community Votes Unanimously to Destroy 1.3B UST Tokens

By Matt Brienen

Published: 2022-05-27T18:22:43+00:00

The governance vote on Terra’s proposal 1747 to burn 1.388 billion UST stablecoins has passed.

This will reduce UST’s supply by roughly 11% of its total supply of 11.28 billion tokens, according to data from CoinMarketCap.

More than 99% of all 154 million votes supported the burn proposal. Less than 1% abstained, and roughly 10,000 voted against the proposal.

The governance vote on Terra’s proposal 1747 to burn 1.388 billion UST stablecoinsstablecoins has passed.

This will reduce UST’s supply by roughly 11% of its total supply of 11.28 billion tokens, according to data from CoinMarketCap.

More than 99% of all 154 million votes supported the burn proposal. Less than 1% abstained,

The mass burn is expected to reduce price pressure on LUNA caused by the inflated UST supply.

The proposal stated that burning UST tokens would help alleviate the peg pressure on the crashed algorithmic stablecoin. The high reward on on-chain swap spread (or arbitrage between UST and LUNA) is the primary cause of the economic burden on the Terra ecosystem, according to the proposal.

The current UST burn rate (the rate at which UST is burned for the dollar equivalent to LUNA) is too slow, making it difficult to eliminate the economic burden incurred by the ecosystem.

Hence the expedited manual burn, explained the proposal.

and roughly 10,000 voted against the proposal.

The mass burn is expected to reduce price pressure on LUNA caused by the inflated UST supply.

The proposal stated that burning UST tokens would help alleviate the peg pressure on the crashed algorithmic stablecoin. The high reward on on-chain swap spread (or arbitrage between UST and LUNA) is the primary cause of the economic burden on the Terra ecosystem, according to the proposal.

The current UST burn rate (the rate at which UST is burned for the dollar equivalent to LUNA) is too slow, making it difficult to eliminate the economic burden incurred by the ecosystem.

Hence the expedited manual burn, explained the proposal.

When the Dollar-peg of UST dropped rapidly, this mechanism came undone, resulting in the swift increase of LUNA supply, crashing its value by 100%.

UST currently trades at $0.03, down 97% from its dollar peg.

Following the crash, Do Kwon, the cofounder and CEO of Terraform Labs, proposed to deploy a new blockchain and rename the existing blockchain as Terra Classic. It was also approved recently. The new iteration of Terra will not include an algorithmic stablecoin.