Terra Luna founder offers a regeneration plan, which includes a token redistribution

The Terra founder has presented a new governance plan to keep the community alive and recompense token holders after two days of silence.

Terra Luna crash
Terra Luna

Do Kwon, co-founder of Terraform Labs, has proposed a plan to save the Terra ecosystem following the historic depegging of its algorithmic stablecoin, UST, and the ensuing death spiral that drove Terra (LUNA) tokens to near-zero.

"The Terra community must reassemble the chain to maintain the community and the developer ecosystem," Kwon wrote on Terra's research forum on Friday.

In response to validator groups discussing the potential of forking the Terra chain, he proposed rewarding UST and LUNA holders who were unable or unwilling to sell their shares amid the price drop this week.

Validators, according to Kwon, should reset network ownership to 1 billion tokens distributed among LUNA and UST holders, as well as a community pool for future development funding.

Specifically, before the depegging event, 40% of the newly distributed tokens would go to LUNA holders; 40% would go to UST holders on a pro-rata basis at the time of the new network upgrade.

Aside from this, 10% would go to LUNA holders just before the chain halted operations; and the remaining 10% would go to the development pool.

Given the massive liquidity events that have occurred across the Terra ecosystem this week, Kwon believes that repegging UST to the US dollar would make little effect.

In other words, confidence in the stablecoin paradigm has been irrevocably destroyed. He elaborated:

"Even if the peg were to eventually restore after the last marginal buyers and sellers have capitulated, the holders of Luna have so severely been liquidated and diluted that we will lack the ecosystem to build back up from the ashes."

According to CoinMarketCap, LUNA's market cap peaked at nearly $41 billion in early April.

Terra's UST, which is no longer considered a stablecoin, reached a high of around $19 billion. UST fell to a low of roughly $0.13 on Friday after losing its dollar peg.

Despite the fact that there is no way to entirely recover the blockchain's value, Kwon believes the redistribution plan should pay the network's debt holders as well as "committed community members and creators."

Kwon's proposal came two days after he presented a plan to save the UST dollar peg, which included doubling the protocol's minting capacity and raising the special drawing rights pool.