• The Terra community unanimously votes to destroy 1.3 billion UST tokens

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

    According to CoinMarketCap data, this will lower UST’s supply by around 11% of its total supply of 11.28 billion tokens.

    The request to burn was backed by more than 99 percent of the 154 million votes cast. Less than 1% abstained, and approximately 10,000 voted against the proposition.

    The proposal’s principal goal is to burn UST tokens from the community pool in order to eliminate bad debt in the Terra economy and help restore the stablecoin’s dollar peg.

    “If this proposal passes, the 1,017,233,195 UST from the Community Pool will be sent to the Community Core Burn module,” read the proposal. “Additionally, the 371 million cross-chain UST will be bridged back to Terra and burned.”

    The Terra community pool holds 1.017 billion UST of the total 1.388 billion UST to be burned, with the remaining 371 million UST coming through the Ethereum cross-chain bridge. Terra’s community pool monies can only be used if approved by the Terra community.

    The bulk burn is expected to relieve LUNA price pressures caused by elevated UST supplies.

    According to the idea, burning UST tokens will help relieve peg pressure on the collapsed algorithmic stablecoin. According to the idea, the large reward on on-chain swap spread (or arbitrage between UST and LUNA) is the fundamental cause of the Terra ecosystem’s economic burden.

    The present UST burn rate (the rate at which UST is burned for a dollar equivalent to LUNA) is excessively slow, making it difficult to erase the ecosystem’s economic burden.

    As a result, the plan suggested an expedited manual burn.

    Terra’s implosion is being unraveled.

    UST, the once-third-largest stablecoin, lost its dollar peg earlier this month and never recovered.

    Terra’s algorithmic stablecoin, unlike popular stablecoins like Tether’s USDT and Circle’s USDC, was not backed by any assets. Instead, it was governed by algorithms and smart contracts. The method used to keep UST pegged to the dollar was an arbitrage trade between UST and the project’s native LUNA coin.

    When UST fell below its peg, users may purchase the cheaper UST and swap (and burn, eliminating it from circulation) for $1 worth of LUNA Classic, and vice versa.

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