As Terra blockchain struggles to recover from the loss, Binance CEO Changpeng Zhao announced his support for the Terra community. He also advised them to abandon hard forking and adopt the buyback and burn strategy to revive its token.
Ever since LUNA and UST collapsed, the Terra community has been at quite a loss. The issue began when UST failed to peg the dollar which in return affected LUNA’s prices gravely. Amidst the crypto crash, both the stablecoin and native coin struggled to maintain their price, and eventually, they both dropped to an extreme low.
According to CoinMarketCap, UST depegged to $0.68 on May 9, 2022. Seeing the near death of TerraUSD, many crypto exchanges like Binance suspended UST and LUNA trading on the platform forcing Terra blockchain to halt its network on May 12, 2022. As of 16 May 2022, the UST is at $0.125, a 38.22% drop over the last 24 hours.
To recover from its loss, the Terra community decided to attempt the hard forking Terra blockchain (TERRA2) to revive its ecosystems, LUNA and TerraUSD. The hard forking to Terra means that a new token will be issued and distributed among all holders included in the snapshot before the market crash.
Kwon Do is also reviewing the possibility of the LUNA fork which will give birth to a new mechanism. However, according to an article by Arijit Sarkar, an editor at CoinTelegraph with an M.A in Journalism and Mass Communication, Zhao disagrees with this strategy.
CZ questions Terra community
Seeing the increasing speculations that Terra is considering a new version of LUNA through hard forking, Binance CEO CZ stepped up on Twitter to criticize the community’s decision regarding LUNA and TerraUSD (UST).
He tweeted, “This won’t work.
– forking does not give the new fork any value. That’s wishful thinking.
– one cannot void all transactions after an old snapshot, both on-chain, and off-chain.”
The CEO said that the aim of every crypto coin should be to increase its value to ensure it maintains a stable price despite crypto crashes. If the community abandons the old coin, LUNA might lose its value quickly.
CZ advises buying back and burn
Below the tweet, the CEO questioned how Terra was using the BTC reserves it claimed to have since the launch of UST.
Terra had introduced a Luna Foundation Guard (LFG) that collected Bitcoin reserves to maintain UST’s status in the market. The reserve has $3.5 billion BTC, around 115 trillion dollars, which can be used to recover UST.
He suggested that Terra should use the LFG reserves to recover all the UST to bring back its $1 peg.
In terms of forking, CZ said “Minting, forking, don’t create value.” Instead, the community should consider burning the token to increase its long-term value in the market.
He said, “Reducing supply should be done via burn, not fork at an old date, and abandon everyone who tried to rescue the coin. I don’t own any LUNA or UST either. Just commenting.”
Many tokens like Dogecoin have adopted this strategy of burning tokens to reduce supply and increase their demand in the market. If a memecoin made can rise to value in the crypto market, so can LUNA which was once a thriving coin.
To add more, Binance’s CEO also demanded Terra be more transparent and provide more details about its approach to the community such as information on all the funds on particular on-chain transactions (transaction IDs).
“Failures can/will happen. But when they do, transparency, speedy communication, and owning responsibility to the community is extremely important.”
Seeing the sudden interest of a crypto exchange’s CEO for LUNA, rumors about Binance being involved with Terra surfaced on the internet. However, Zhao denied those speculations by saying that Binance Labs, an investment arm of Binance committed to funding web3 startups and companies, invested $3M USD on Terra in 2018 and they haven’t been involved with UST at all.
The CEO showed support to the community by saying he’s hoping Terra is able to recover from the loss. He tweeted: “I am just hoping that the project teams can rise from the ashes and rebuild in a proper and sensible way. Regardless of my personal views, or the solution chosen in the end, we will always be here to support the community in any way we can.”
As Terra blockchain looks for possible solutions to recover LUNA and UST, it is essential for the team to remain transparent with whatever approach it is taking. Being one of the top cryptocurrencies with thousands of traders and investors, Terra must think of an effective way to solve this issue.
Although CZ’s advice of buying out and burning LUNA seems authentic, it all depends on whether Terra considers this suggestion or sticks to hard forking to create a new LUNA. Whatever the decision may be, LUNA traders anxiously await updates from Kwon Do and his team.