Following the massive meltdown of the algorithmic stablecoin UST, Terra LUNA has continued its downward spiral. Do Kwon, CEO of Terraform Labs, who vanished following UST’s disaster, has reappeared and published Proposal 1164, a recovery plan.

Terra is bleeding as the market crashes, and investors are waiting for a recovery strategy.

After losing its $1 peg, Terra’s algorithmic stablecoin UST crashed. Despite Terraform Labs’ use of a dual token method to fix UST’s peg to $1, this occurred.

If the UST price surpassed $1, Terra users burnt $1 in LUNA to coin 1 UST, increasing the quantity of UST. Theoretically, a rise in supply allowed the stablecoin to return to its peg.

When UST fell below $1, burning UST lowered its supply, allowing the peg to remain stable.

While Terraform Labs’ dual token method performed admirably through early 2022, the Luna Foundation Guard, the group that maintains the integrity of UST, purchased billions of dollars in Bitcoin and established a reserve for Terra as an additional safety.

Experts warned investors about the risks of algorithmic stablecoins and prior disasters like Iron Finance’s IRON, which was dubbed the “world’s first crypto bank run.”

With escalating market volatility, the pressure on Terra’s tokens mounted, and UST lost its peg on May 8, 2022. Proponents saw a comeback within hours, thanks to a Curve Finance user’s decision to put $146 million in a pool in exchange for UST, which increased its price.

Do Kwon, the CEO of Terraform Lab, revealed Luna Foundation Guard’s plan to loan out $1.5 billion in Bitcoin and UST reserves to protect the stablecoin’s peg; unfortunately, their efforts failed, and the token crashed.

The CEO disappeared after telling his 495,700 Twitter followers that he is working on a revised plan to boost Terra token recovery. Kwon’s reappearance was accompanied by an assessment of the existing situation and a request to issue more UST.

2/ I understand the last 72 hours have been extremely tough on all of you – know that I am resolved to work with every one of you to weather this crisis, and we will build our way out of this.

Together.

— Do Kwon 🌕 (@stablekwon) May 11, 2022

Proposal 1164 addresses the sluggish burn of UST, which is the primary source of the stablecoin’s abundant supply and volatile peg. The proposal elaborates on the loss of faith in the UST peg and concerted attacks with the purpose of de-pegging the UST and aggressively driving down Terra LUNA prices.

Kwon believes that speculators in the cryptocurrency market have taken advantage of the UST peg restoration announcement and burned more UST to create billions more LUNA. This has expanded LUNA supply while continually pushing UST below its peg. Traders’ front running and selling operations are causing LUNA to fall.

Kwon proposes increasing the size of the BasePool and decreasing the recovery block because there is more LUNA being minted than is required. This would quadruple daily minting capacity and help the Terra/LUNA ecosystem recover.

Kwon’s big idea is a community proposal that has gotten almost 86 million “YES” votes, a nod from the community that is waiting for Terra’s symbolic recovery.

The collapse of Terra’s stablecoin has piqued the interest of cryptocurrency critics and analysts, who foresee additional declines in LUNA and UST in the absence of tangible actions to revive the coins.

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