Following the approval of a proposal to rename and build a new blockchain, Terraform Labs has decided to launch LUNA 2.0 tomorrow. This is to restore a collapsed system but with a totally different approach. This news has upset a lot of little and large terra investors, who are still unsure about their fate and how to get their money back.
The new Terra 2.0 asset will be known as $LUNA, whereas the previous token will be known as WLUNA or LUNA classic. A lot of speculations have been ongoing by investors about the fate of their investments but Terra platform has released a statement regarding that.
Analysts believe that the planned relaunch is Terra’s plan to achieve a possible redemption following the $UST crash, which would in return restore trust in the Terra ecosystem. It might also send a resounding signal to authorities, regulators and nocoiners that the blockchain tech is still viable and the future of blockchain finance is still resilient.
However, it is not certain if people are going to buy into Terra’s new goal.
The $LUNA meltdown, which occurred a few weeks back, has made most crypto investors wary of Terra’s Luna and its stablecoin, the UST. In a space of days, about $40 billion worth was lost by traders who were holding both tokens.
Airdrops and freebies
Terra plans to gift users who were affected with airdrops as well as encourage new adopters. The plan is as follows;
There will also be an airdrop for only $LUNA and $UST holders. In terms of purchasing time, though, it differs. LUNA holders who purchased the token before the attack will receive a 1:1 airdrop, while those who purchased the token after the collapse would receive just 1:0.000015. LUNA is currently valued at $ 0.00015
For $UST holders, the situation is even more difficult, since those who had the stable coin before it was devalued will receive only 1:0.033, while those who bought after the collapse will receive 1:0.013. And, the $UST is presently trading at $0.09.
Following the launch on May 27, users with 1,000 $UST will receive 13 free LUNA tokens, while LUNA classic will be valued at 0.15 new LUNA tokens per 10,000 LUNA classics.
Why it crashed
It’s unclear why $UST lost its peg and was unable to be rescued by $LUNA. Many of its investors believe it is part of a coordinated campaign to abuse Terra and force bitcoin to drop, allowing people to buy at a lower price. Some see it as a way to mitigate the 1% risk of investing in cryptocurrency.
Experts, on the other hand, believe that the sudden drop was caused by a large cashout. Prior to the collapse, Anchor Protocol, a crypto-savings platform specializing on Terra coin, decided to revalue the platform’s interest rate, which was previously set at 20% to a lower rate.
Following that, an unidentified $2 billion UST withdrawal from the Anchor Protocol was made. The alarmed traders, who sold off their Terra USD and LUNA tokens, caused the UST to fall. To avoid a liquidity crisis, there was a significant sell-off on the LUNA token in order to restore UST status, resulting in a rapid decline in both LUNA and UST prices.
Do Kwon, the company’s CEO, has not commented on the likely causes of the system’s failure, but he has announced a new option called Terra 2.0.
But, folks are doing their bits to protect themselves.
A number of legal teams are initiating court processes to protect investors. The Luna Foundation Guard’s (LFG) corporate funds have been frozen by the Seoul Metropolitan Police Department in order to prevent further withdrawals.
Some analysts believe that the Terra platform’s innovative concept will continue to fail. This is basically a case of a lack of trust. And, it is unclear how quickly the crypto ecosystem will be stabilized.
Others claim that the market is generally going through a rough patch and that investors should avoid investing heavily for the time being.
However, many small investors are not necessarily in agreement with the general pessimism about a swift rebound. Some have said that risk is a crucial part of long term investment.
In all, starting a new blockchain and expanding on the strengths and shortcomings of the old system may be a fine concept, but will the new Terra offering get as much traction as the old LUNA system did? Only time will tell!
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