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Luna CEO Do Kwon proposes spinning off LUNA, UST to compensate Hodler

Luna Foundation Guard CEO Do Kwon has written a proposal suggesting branching LUNA into a new chain using a pre-attack snapshot. He describes a recovery plan that involves handing over the new blockchain to the community rather than the LFG wallet.

The application

The new chain would have a cap of 1 billion coins. 400M would be awarded to LUNA holders “before the de-pegging event”, 400M to “UST holders at the time of upgrade” and 100M to LUNA holders at the “last moment of chain stop” and 100M to a community pool . With the exception of the 100 million tranche, all LUNA should be “staked at the network genesis state”.

He continues

“The Terra community needs to rebuild the chain to sustain the community and developer ecosystem.”

At no point in the proposal does he apologize to the community, seemingly refusing to step down by saying “I will always be here.” Whether he would play an active role in the new blockchain is unknown at the time, however. If LUNA2 is decentralized through community development, LFG, and therefore Do Kwon, may not matter.

community property

The focus now appears to be on the developer community and ecosystem. Do Kwon clearly expresses a desire to “preserve this amazing ecosystem…preserve his L1”. In a “call to action” he explains,

“Why does this redistribution make sense? UST holders must own a large stake in the network because, as debt holders of the network, they deserve compensation for the tokens they held to the end.”

He also accepts that UST has “lost too much trust from its users” and claims that any attempt to salvage the current blockchain would be impossible

“Owners of Luna have been liquidated and diluted to such an extent that we will lack the ecosystem to rebuild it from the ashes.”

Alongside those statements, he goes on to boast that Terra even “is in distress, has strong brand recognition, and a name almost everyone in the world will have heard of.”

He may think there’s no such thing as bad publicity, but after the past few days, it’s hard for him to agree.

He mentions the development of the developer community on Terra, which must not be forgotten at this time. These projects will lose everything if Terra fails. Taking all ecosystem controls out of the hands of the LFG may be the only way to save these projects.

In the final call to action he states:

“The rallying cry for the Terra community has always been ‘a decentralized economy needs decentralized money’.” This is an exciting vision and while UST was unsuccessful, at some point in the future the Terra community will find ways to iterate on the idea.”

The answer

Reaction to the proposal has been mixed with 930 replies since it went live tonight. When asked if he felt responsible for what happened, he chose to ignore the question and answer a different part of the user’s response.

Many responses are from LUNA owners and not the developer community, with countless stories of investors who lost money. Many replies disagree, calling the plan “garbage” and “unfair”.

Can Terra survive without forking?

There are still suggestions that suggest LUNA could use the burn mechanic to keep the current blockchain. George Harrap, co-founder of Step Finance, a portfolio management dashboard for Solana explains:

“The mechanics for Terra are such that there is still so large a UST bid pending that the bid for Luna is evaporating so quickly that it is unlikely that the existing UST debt will ever be collateralised at that rate. Therefore, I think the most likely course of action is an intervention by Terra validators to stop and update the network to critically lock withdrawals for now.”

Jon Wood, a contributor at Harvest Finance, a leading yield farming protocol, told us via Telegram: “In my opinion, Luna is not recovering from this. It’s an unprecedented annihilation that has shattered all faith in the project and left many with real pain.” He doesn’t have high hopes for the community proposals currently being discussed on the Terra Forums.

“The suggestions are there to perhaps give inexperienced retail users a little hope that something is possible, but at this stage the ship is well and truly sailed.

Regarding the concept of forking the blockchain as suggested by Do Kwon, he said:

“A fork is the only possible outcome that could see the light of day, but I don’t see how it would generate value as most blockchain developer talent in the space wouldn’t touch it with a barge pole, but investors would keep well away.”

Put the suggestion into action

Stablechen previously posted on Twitter that validators have convened to decide on a proposed redirect. It is possible that Do Kwon was not invited due to the nature of this post, but no information has been officially released.

However, in response to the post, Stablechen also outlined a very similar plan to Do Kwons. In order for a new chain to spawn on Terra, validators must approve a proposal submitted by another validator. This would not necessarily be the case with Do Kwon’s strategy as it would use a new blockchain. Validators would have to load a snapshot version of the Terra chain from an earlier moment and then activate the nodes. The next step is waiting. The entire crypto community is watching.

Forking a chain after an attack is not unprecedented, as Ethereum did something similar after a hack. The result will have blockchain maximalists arguing that you cannot change the blockchain. A fork of a top 10 project could have a massive impact on the entire community as the immutability of the blockchain is challenged.

UPDATED 13 May at 11:00 PM: Added additional comment

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