Terra Classic community has launched a new bid to revive the TerraClassicUSD (USTC) stablecoin and LUNC tokens and increase their value to $1.
The latest move came as a suggestion from dfunk, a prominent figure in the LUNC community. Details of the offer were recently revealed on the Terra Classic Commonwealth forum. According to the notice, the proposal focuses on the safe reactivation of the market module.
Notably, this module had been disabled since the unfortunate LUNC bank operation (later LUNA) and USTC de-peg incidents in May 2022.
The proposal to reactivate the market module includes a number of strategic adjustments to reduce risks and increase rewards. The identified risk includes the potential for the supply of LUNC and USTC to increase through unintended minting of the two tokens.
Meanwhile, potential benefits include restoring USTC’s peg to $1 and restoring benefits to the blockchain. Additionally, it is possible for LUNC and USTC to generate revenue by collecting spread fees on their swaps. It is possible that the earned funds will be distributed to validators and delegates.
Recommended Changes
The first significant change includes setting the Spread Fee at 98%. This action would effectively peg USTC to $0.02, the proposal stated. Notably, USTC is currently trading at $0.0133.
Under this arrangement, each USTC exchange generates $1 worth of LUNC. However, only 2% of LUNC is intended to be delivered directly to the user’s wallet. The remaining 98% will be directed to the Oracle Pool and the funds will be recommended to be burned rather than added to circulation.
Specifically, the proposal proposed burning 100% of the Spread Fee rather than sending it to the Oracle Pool. There was also the view that minting 98% of LUNC in Oracle Repositories contradicts the community’s attempt to reduce the supply of digital assets.
To address this concern, the proposal suggested that the spread fee be directed to the burn module instead of the Oracle Pool. Additionally, the proposal proposes to limit the virtual liquidity pool size. Increasing the recovery rate to address other potential risks associated with printing money is another suggestion of the proposal.
The community has reduced the base pool size and extended the recovery period. This aims to ensure that the burn rate exceeds the replacement rate and further minimize risks.
As an additional measure, the proposal proposes to impose a hard cap on the maximum supply of LUNC and USTC.
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Source : The Crypto Basic