The cryptocurrency market had a pretty dark month in May, with even the industry leader BTC experiencing an unprecedented eighth straight week of declines. But it was Terraform Labs' Luna, a sister coin to UST that has plunged from $85 earlier this month to almost nothing that has excited investors the most. To save Terra blockchain from extinction, the publisher has announced plans to fork out a new chain and rename the old one Terra Classic.
In the latest news, a proposal to fork the Terra blockchain was approved on Wednesday, following the historic Luna token debacle.
The plan is that the new blockchain will treat older tokens differently, with existing Luna tokens being treated as Luna Classic and newly minted Luna tokens being distributed to investors who lost their money during the TerraUSD (UST)/Luna stampede.
The biggest change in the new Terra blockchain is the removal of TerraUSD (UST), which was responsible for Luna's big crash.
As a stable currency, TerraUSD (UST) tries to maintain the 1:1 anchoring between the currency and the US dollar through a special set of algorithms.
However, unlike stablecoins such as Tether and USDC, UST does not have us dollar assets as reserves.
To avoid a repeat of that mistake, the new Terra blockchain will completely abandon the arbitrage space that takes advantage of Luna's volatility.
UST, with a market cap of $2bn, was run on and sold off for hundreds of millions of dollars during the May 8 crypto meltdown.
With UST decoupling to $98, the exchange mechanism between TerraUSD and Luna tokens became untenable, resulting in a spiral collapse of investor confidence.
UST currently costs about 8 cents, while Luna is just 1 cent, meaning more than $17 billion of bubble has gone up in smoke in the current cryptocurrency crash.
After Terraform Lab CEO Do Kwon proposed and planned to "fork" The Terra blockchain on May 16, the community finally voted to approve it on Wednesday. If all goes well, the new Terra blockchain will be officially launched on May 27.
"With overwhelming support, the Terra Eco-community has voted for Proposition 1623, calling for a new blockchain to protect our community," @terra_Money wrote on Twitter.
However, before the TerraUSD (UST) crash led to the fork of the blockchain, Ethereum also implemented a highly controversial hard fork in 2016 to resolve the 3.6 million ETH (current price: $50 million/present value: $7 billion) looted by a hacker through the DAO.