Recent Updates About Do-Kwon and the Terra Meltdown

Since the Terra project's monumental collapse, Kwon Do-Hyeong, Terraform Labs' CEO, has proposed various strategies for a network rebound. For a brief recap, the stablecoin TerraUSD saw its value tank alongside sister token LUNA within the space of a week.

Although many are reluctant to believe the token can make a comeback, Do-Kwon has remained optimistic about the network's revival. His ideas have met different responses; however, most participants in the crypto community share a sentiment of mistrust. Let's review Do-Kwon's ideas for recovery and other recent developments with ties to the ongoing situation.

Kwon Do-Hyeong's Revival Plans For the Terra Stablecoin Network

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Do-Kwon's ideas have not experienced a lot of positive reception. Despite the sudden nature of the stablecoin's depegging, he had received warnings that a crash was imminent. However, he clapped back at analysts and investors alike who suggested a meltdown.

Entirely dismissing the possibility, he said the detractors would "be waiting till the age of men expires." Even at the onset of the slump, Do-Kwon failed to give it much gravity. Of course, this soon changed; however, in light of Do-Kwon's former attitude, it makes sense that the broader crypto community is skeptical of his plans to resurrect the project.

The hesitation is further founded, considering that algorithmic stablecoins are yet to experience industry-wide acceptance. This is especially true for UST because many investors didn't place much store in a stablecoin backed by an incredibly volatile asset. The outspoken Terraform Labs CEO has since faced much fire both online and offline.

Terra Empties Bitcoin Reserve

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The initial decoupling saw Do-Kwon move to preserve UST's peg to the dollar by emptying the Luna Foundation Guard's store of BTC. Referred to as the LFG, the Terra-focused non-profit had amassed about 42,530.82 BTC.

Do-Kwon shared in a tweet that the foundation had voted to deploy $1.5 billion, split cleanly into UST and BTC. The goal was to use the funds to purchase large volumes of UST to create buying pressure that would push the stablecoin back to its peg. Evidently, this move failed, despite the LFG eventually loaning out nearly all of its $3.5 reserve. Terra continued to plummet until roughly $40 billion worth of value was destroyed.

Implementing Proposal 1164

On Wednesday, May 11, Do-Kwon posted a thread outlining his redemption plan. He explained that the first necessary move was to increase the rate at which the dipping stablecoin was absorbed into the system. The token supply seeking to exit had to be addressed for $UST to venture towards repegging.

Do-Kwon's plan was centered around the community's approval of proposal 1164, which entails increasing the volume of LUNA tokens minted daily. Terra would raise the limit from $293M to $1.2B every day. This idea was founded on the relationship between UST and LUNA; before the crash, the stablecoin maintained its value through a mint and burn system called arbitrage.

The tokens are tied such that when the stablecoin drops below its peg, UST holders can swap their tokens for LUNA. The algorithm burns the swapped stablecoins and mints more LUNA tokens, thus decreasing UST supply and driving up the price.

However, the volatile state of the market had investors clamoring to get rid of their UST holdings. The sheer volume of users dumping their holdings, including arbitrageurs, destabilized the mechanism. With the LUNA trading so low, the system couldn't absorb the influx of TerraUSD tokens.


Proposal 1164 would expand the LUNA base pool from 50M to 100M SDR and simultaneously cut the pool recovery block in half, from 36 to 18. Altogether these changes would enlarge the minting capacity, thus putting the network on the path to recovery.

A Terra 2.0 Hard Fork

Following the failure of his previous strategy, the brazen Do-Kwon took to Twitter once more to unveil new plans for the network's salvation.

The executive started out saying the Terra ecosystem was more than UST. He then suggested a hard fork, splitting the existing Terra chain to create a new branch called Terra. According to Do-Kwon, the new chain would have zero connection to the network's former stablecoin.

So far, this is Do-Kwon's biggest proposal; the plan also entails reintroducing the existing LUNA tokens as the Luna classic token, $LUNC. The native token for the new Terra would assume the name the original name $LUNA. The Terra classic chain and the new Terra branch would co-exist.

Do-Kwon explained that the new Terra would be fully community-owned, and there would be an airdrop of the new tokens to $LUNC holders, stakers, and core app developers. The team would airdrop about $1B worth, and Terraform Labs would not participate.

Community Response

The hard fork has garnered more support than the rest of Do-Kwon's ideas. The terra community put the suggestion, proposal 1623, to a vote, and user feedback pushed for three amendments to the proposal. The critical change is that Terra will not be forking; rather, Terra 2.0 will be the genesis of a new blockchain. The testnet version is already live, and the entire blockchain will be operative by Friday, May 27.

Additionally, the amendments called for modifications to the details of the airdrop to accommodate pre and post collapse LUNA and UST holders. This means that four categories of individuals are eligible to receive LUNA tokens. Terra validator "Orbital Command" made a comprehensive thread about the changes. Here's a breakdown of the ratio and other details of the launch.

• Pre-crash LUNA Holders – 1:1
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• Post-crash LUNA Holders – 1:0.000016
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• Pre-crash UST Holders – 1: 0.033
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• Post-crash UST Holders – 1:0.013

Not all the token holders are on board with Terra 2.0. Several believe that a better path would be to burn the existing LUNA tokens in a bid to generate scarcity and possibly stir up the prices. Another argument is that the new chain, which accommodates specific dates, fails those who attempted to help revive the network during the crash. Do-Kwon has shared repeatedly that he sees no sense in destroying the tokens; however, on Saturday, he gave in to the growing demand for this and dropped a tweet containing the digits for a burn address.
"There you go," the executive said and later on explained that holders who wanted to burn their tokens only had to send them to the provided address.

Kwon Do-Hyeong Currently Under Attack

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As stated earlier, Do-Kwon has faced tons of backlash both online and in person. He has received a barrage of threats and abuse from aggrieved investors who suffered losses from the crash. The CEO's refusal to heed warnings ahead of the network's implosion has painted him in bad light before several individuals.

Several Twitter users have retweeted some of Do-Kwon's posts that now appear highly ironic, given the current situation. One of the most publicized was an interview eight days before the crash where the Terra founder says only 95% of crypto startups nowadays are heading towards certain death. Laughing at the statement, he added that watching companies collapse was amusing.

Outside of the Twitter trolling, matters are far more severe as a citizen of Singapore (where Do-Kwon also hails from) filed a police report against him. The complainant alleged that Terraform Labs had scammed over 1000 Singaporeans with the LUNA tokens.

According to reports from Wu Blockchain, even Do-Kwon's wife has not been left out. An angry stranger reportedly breached the couple's apartment leading her to put out an emergency call to the police.

Is Legal Action Worthy of Consideration?

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The police report may point toward the start of a series of lawsuits against Do-Kwon in the coming months. However, considering the decentralized nature of the crypto space, it's a different matter whether or not the potential filings will hold up in court.

It is worthy of note that core members of the Terraform Labs legal team have resigned in the wake of the crisis. No defined reasons have been provided for the resignations of these three attorneys, namely Marc Goldich, Lawrence Florio, and Noah Axler. Goldich performed as the general counsel for nearly a year, while Florio was chief corporate counsel over the past five months. Axler, on the other hand, was the firm's chief litigation and regulatory counsel.

Some have speculated that this might be due to financial constraints. Replacements should be a priority, with a legal onslaught likely heading for Terraform Labs.

Additionally, the Seoul metropolitan police agency is investigating signs of embezzlement in the LFG's holdings. The Korean Broadcasting System (KBS) reports that the officials have asked five major exchanges to freeze assets related to the LFG. The platforms are Upbit, Gopax, Bithumb, Korbit, and Coinone. The police have also leveled accusations at the firms claiming they benefited from the crash while promoting the tokens.

While the exchanges are reportedly not obligated to consent to the police, it appears there will be a meeting between the people's power's party and representatives of the five platforms to discuss the situation. An interesting side note is that Binance subsidiary Binance Futures has delisted the LUNA token amidst the drama.

Conclusion

Whether or not Terra will make a comeback is still under question. Do-Kwon's latest proposal has received support from various projects such as Nebula, Sigma, Anchor, One Planet, and others, all of which have promised to work with Terra 2.0. However, the bearish state of the public crypto space makes for slim chances of success; add the rest of the unfolding drama, and things just aren't looking good for Terra and Do-Kwon.



Author: Gate.io Observer: M. Olatunji
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