Can a Terra “renaissance” save investors?
- New LUNA tokens will be distributed to LUNA and UST holders
- Venture capital firm Hashed is said to be in a $3.5 billion hole, but will be helped by the new plan
The latest proposal to revive Terra’s ill-fated ecosystem is about to be approved by the Terra community. Although there are four days left in the vote, it has already hit a threshold after just three days, so barring a dramatic reversal (voters may change their minds during the voting period), a new network Terra will be formed on May 27.
The modified “recovery plan” was posted on the Terra Governance Forum by Terraform Labs founder Do Kwon. It requests that the existing Terra network be renamed Terra Classic – with its native Luna Classic (LUC) token. The new LUNA is expected to be airdropped to Luna Classic stakers, Luna Classic holders, UST holders, and an cadre of Terra ecosystem developers deemed “essential.” These include projects focused on decentralized exchange, block explorer, payment apps, wallets, lending markets, bridges, and stablecoins – but not the UST algorithmic stablecoin. Instead of UST, the new network will rely on Bridged Tether (USDT) and USDC.
In addition to a 30% allocation to a “community pool,” 35% will go to LUNA holders prior to the May 7, 2022 depegging of the UST – which is referred to as “pre-attack” – and 10% to “post-attack”. attack” LUNA on the snapshot date of May 27, 2022. An additional 10% will go to Anchor UST depositors upon unanchoring, while 15% will go to UST holders beginning May 27.
Notably, Terraform Labs will exclude its own LUNA and UST holdings from the snapshot – the goal is for the new network to be fully community-driven. They also cap the exposure that will qualify for the new token, to favor more community participants, rather than whales.
More than half of LUNA delegates have participated in the vote so far, with approximately 62% voting in favor.
Investors see the damage
Venture capital funds with broad exposure to Terra have begun to publicly discuss their own losses. These are mostly LUNA tokens, which are trading Saturday at nearly $0.0001 per token, down from a high of $119 on April 5, 2022.
Galaxy Digital did not disclose its losses on LUNA holdings, but reported a net realized gain on digital assets of $356 million in the first quarter of 2022, much of which is attributed to LUNA sales.
Galaxy CEO and founder Mike Novogratz, who inked a LUNA tattoo on his arm in early January, wrote in a letter to shareholders that the LUNA crash “will be a constant reminder that venture capital investing requires ‘humility”.
Delphi Digital was a frequent supporter of Terra and funded the development of dApps in the ecosystem. In a blog post titled “Lessons from the Last Week,” the team flagged its $10 million fundraising investment Luna Foundation Guard, through its branch Delphi Ventures, as “all lost.”
“Delphi Ventures did not sell any LUNAs at this event,” the post reads.
South Korea-based crypto VC Hashed fared much worse. The company has delegated millions of LUNA tokens, worth over $3 billion. Since the Terra Network enforces an inflexible 21-day period, it was impossible to sell these tokens, even if it became clear that a “death spiral” was inevitable.
This story was updated on May 21, 2022 at 4:05 p.m. ET.
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