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Terra 2.0

The minority of LUNA holders passed a controversial decision to launch Terra 2.0

The proposal to relaunch the Terra blockchain without UST and with a new LUNA 2.0 token has passed with 65.5% of participants voting in favor of the new plan. The new blockchain inherits the Terra name with airdropped native token LUNA, while its current version is renamed to Terra Classic with the LUNC token.

While there was a lot of opposition on social media platforms to the controversial fork, 99.9% of LUNA tokens were not able to vote on the proposal, because LUNA delegation has been disabled on May 12 shortly after the UST de-pegging. On that day the total LUNA supply had not yet hyperinflated to trillions of tokens.

Interestingly, this created a situation in which new LUNA buyers, who were providing an exit liquidity to UST holders during the meltdown, ended up not having any voting power.

As a result, even on the re-branded Terra Classic blockchain less than 0.01% of all LUNC tokens can vote, giving the TerraForm Labs (TFL) and the pre-attack LUNA holders control over the governance process of the original chain.

The community proposed to re-activate staking in order to give voting power to all LUNC holders on the Terra Classic blockchain after the launch of the Terra 2.0 chain. However, there is not much incentives for the TFL to voluntarily give up its power over the original chain, which can potentially become a competitor to the new Terra blockchain.

Meanwhile, Ethereum’s layer-2 scaling solution Polygon took advantage of the situation and launched the multi-million dollar Terra Developer Fund in attempt to bring Terra developers into the Polygon ecosystem. NFT marketplace OnePlanet is the first project to receive the funding and migrate from the Terra blockchain to Polygon.

Regulations

Authorities react to the UST collapse

The Seoul Metropolitan Police have allegedly asked various crypto exchanges to essentially freeze Luna Foundation Guard’s funds. Earlier in May, the Luna Foundation Guard (LFG) has lent $1.5 billion worth of crypto to unnamed “professional market makers” to protect UST’s peg.

South Korean authorities have reportedly launched an official investigation into the UST crash and summoned all employees of Terraform Labs, one of whom has already testified, according the local media report.

The asian nation is also planning to form the Digital Assets Committee which will create regulations and oversee the crypto industry.

Besides South Korea, various financial watchdogs from across the world signalled stricter rules on crypto stablecoins after TerraUSD (UST) lost its peg.

One of earliest regulators to react to the UST collapse was US SEC Commissioner Hester Peirce, who said during an online panel detabe that stablecoins might face tighter regulations.

In the end of May, the UK government has followed suit by publishing a consultation paper that recommends amending existing legislation to provide the Bank of England with additional power to oversee the administration of failed stablecoin projects.

In other news

  • Litecoin (LTC) has activated the long-awaited MimbleWimble Extension Block (MWEB) upgrade, which provides an opt-in option for users to hide transaction amounts, improving fungibility of the cryptocurrency. However, the new feature doesn’t provide 100% privacy, because transactions can be linked via ‘sniffer nodes’. Litecoin started in 2011 as a fork of Bitcoin with minor changes to its proof-of-work algorithm, block time, and a total supply.

  • The World of Solana community has successfully returned stolen NFTs to the rightful owner. Following the attack, the team behind the NFT project raised royalties to 98%, meaning that a hacker received only 2% of the value of stolen NFTs after selling them on the open market.

  • More than $10 billion worth of Tether’s stablecoin USDT has been redeemed in just two weeks following the collapse of Terra’s UST. The circulating supply of USDT reduced by more than 10% to around 73 billion. Unlike Terra’s algorithmic stablecoin, USDT is a centralized stablecoin backed by cash, cash equivalents, and commercial papers.

  • The Ethereum foundation has launched the proof-of-stake Eth2 Beacon chain on network’s proof-of-work testnet Ropsten. The two are expected to be merged on June 8, while the Mainnet merge is still at least a few months away.

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