Do Kwon, the CEO of Terraform Labs, believes hard forking the Terra blockchain will play an instrumental role in saving the troubled network.
In a series of tweets, Kwon suggested:
“The Terra chain as it currently exists should be forked into a new chain without algorithmic stablecoins called “Terra” (token Luna – LUNA), and the old chain be called “Terra Classic” (token Luna Classic – LUNC). Both chains will coexist.”
According to Investopedia, a hard fork refers to a radical change to the protocol of a blockchain network that effectively results in two branches, one that follows the previous protocol and one that follows the new version. In a hard fork, holders of tokens in the original blockchain will be granted tokens in the new fork as well, but miners must choose which blockchain to continue verifying.
After being forked, the new chain, Terra (LUNA), will not support the algorithmic TerraUSD (UST) stablecoin, whereas the old one will house the Luna Classic (LUNC) token.
Kwon’s proposal for a hard fork is based on the lack of a consensus among different stakeholders. He stated:
“Competing interests from varied stakeholders (e.g.,$LUNA holders, UST holders, Terra builders, etc.) make it extremely difficult and unlikely to achieve consensus on a cohesive, congruent plan.”
Therefore, the new LUNA will be airdropped to residual UST holders, essential app developers, and LUNC holders.
The rain started beating the Terra network after UST’s price experienced a free fall to the extent that leading crypto exchange Binance temporarily halted its withdrawals together with that of LUNA.
Things got worse for LUNA, given that it sent shockwaves to the crypto market by collapsing to near-zero overnight.
At the time, Kwon pointed out that the price stabilization mechanism had a hand in the problem. He noted:
“The price stabilization mechanism is absorbing UST supply (over 10% of total supply), but the cost of absorbing so much stablecoins at the same time has stretched out the on-chain swap spread to 40%, and Luna price has diminished dramatically absorbing the arbs.”
If Kwon’s proposal sees the light of day, the new chain will go live on May 27 because he trusts that Terra is more than UST.
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