Terra should protect smallholders, not whales, says Vitalik Buterin

Vitalik Buterin, co-founder of Ethereum, believes that any proposed payment mechanism for the Terra (LUNA) project should prioritize small hodlers.

The Terra eco-system, as widely documented, went into a death spiral on May 9, with LUNA falling by 100% and the Terra USD (UST) stablecoin losing its USD peg (valued at $0.16 at time of writing).

With LUNA and UST investors suffering significant losses, the community is now seeking for ways to repair the ecosystem and maybe provide financial assistance to the many people who have been financially harmed.

Following this, Vitalik expressed support for the concept on Twitter on May 15, saying that the focus should be on the smaller investor who needs the money, before suggesting that the whale hodlers bear the loss:

"Coordinated sympathy and relief for the average UST smallholder who was misled by an influencer about '20% interest rates on the US dollar,' personal responsibility, and SFYL for the wealthy."

While the Ethereum co-founder did not call for regulation, he did say that potential protections like financial deposit insurance could be valuable in these situations.

"An intriguing unconnected one is Singapore labor legislation. For low-wage workers, greater regulation is needed, whereas the wealthy can figure it out on their own. Things like these, in my opinion, are good hybrid formulae," he remarked.

At this point, it's uncertain whether the project will be able to rebuild or if it will try to recoup investor losses through a temporary rebound, however tough that may be.

It's also worth noting that the proposal linked to Buterin's statements has been amended this week, and it now considers paying out all users up to a $50,000 per-wallet cap.