Do Kwon Cannot Escape Criminal Charges Just by Relaunching Terra Blockchain
Relaunching Terra 2.0 will not save Do Kwon from criminal charges and fraud allegations.
After the de-pegging fiasco that occurred on the Terra ecosystem amid the recent crypto bloodbath, Do Kwon, Founder of the Terra project, proposed the LUNA ‘Revival Plan 2’ a week ago to prevent a total collapse of the firm. Afterward, the company announced via a tweet that the proposal to salvage the Terra blockchain has been approved. In line with the newly developed structure of the blockchain, it was renamed Terra Classic. Similarly, its token name has changed to Luna Classic, with a ticker of LUNC. On the other side, the new blockchain will run its ecosystem by labeling the company’s existing name and token’s ticker. Do Kwon had suggested carrying out what is known as a ‘hard fork’ in the industry language and pressed to split the blockchain into two halves. Then, the original operator of the crypto project, Terraform Labs, amended that proposal to leave the existing blockchain for users and forge a new blockchain entirely.
Terra has recorded one of the worst crashes in crypto history, which started at the beginning of this month. But, the result of Wednesday’s voting for Kwon’s proposal has shown the community a light of hope. Still, it remains to see whether it can recover completely. Considering the approval of the Terra 2.0, the world’s prominent crypto exchange Binance has announced that it plans to work closely with the Terra ecosystem to strengthen the project. Again, this move will shift the stablecoin UST on the newly developed blockchain Terra Classic, designed for particularly maintaining a 1-to-1 peg. That means isolating the token’s operation from the old blockchain of TerraForm Labs.
Do Kwon Seems Super Confident
Kwon declared that the company would award affected users with the newly designed Luna (LUNC) via airdrops. In order to recognize the users eligible for the airdrop, the team will verify the old Terra network participants with snapshots, who were holding Luna tokens and UST. In addition, the company notified that all assets and decentralized applications need to migrate to the new blockchain and advised Luna and UST holders to transfer their assets to a native Terra wallet instead of storing them on exchanges.
At the Receiving End of Terra 2.0
The Terra 2.0 proposal faced much backlash and vigorous debate from many investors and validators. But, thinking about the restitution from project owners, they changed their minds after seeing the value of the holdings of the project’s leadership disintegrate. One other leading crypto exchange, Houbi Global, also voiced support for the reversal of the Terra ecosystem and announced on Twitter that the platform would list LUNA 2.0 once it is launched. 65% of Wednesday’s final tally of voters favored the proposal, while 21% abstained. Similarly, around 13% of the remaining votes expressed “no with the veto.” The Kwon proposal won by a lead of over 33%.
Because of how the algorithm works, this provided for a tremendous arbitrage opportunity where traders were able to redeem 1 UST (trading below USUS $1 worth of LUNA. This design was intended to destroy the UST and reduce its supply which, in turn, should have increased its value. The selling pressure, however, was tremendous, and UST never came close to its US$1 peg. This allowed traders to print LUNA in excess, creating a massive supply of over 6 trillion LUNA in a couple of days. Needless to say, this kind of supply expansion in this short time frame with no possible way to absorb it led to the inevitable – LUNA’s price crash to US$0. The entire Terra ecosystem was wiped out and saw billions disappear from the market in less than a week in an event that will forever echo in the chambers of crypto history.
How Much Would the Hard Forking Help?
Terra 2.0, is the revamped version of the Terra coin. The company’s CEO believes that validating all invalid blocks as well as transactions on the blockchain network will make the coin boom once again. This plan will be done via something called—a hard fork. A hard fork will ensure that Terra is not linked to the current Terra blockchain, instead will be linked to a new blockchain, then the Terra token can be switched to Terra Classic, the stablecoin by Terraform Labs that are not algorithmically designed. It should be noted that Terra-Luna coins are sister coins and to maintain the balance between them, users had to buy some Terra and then exchange it instead of Luna, for which they would earn small profits. With both coins crashing, after the supply-demand ratio broke, the only way the CEO believes to revive the coins is through the introduction of a new coin. Global cryptocurrency exchanges such as Binance, FTX, Crypto.com, Huobi, Bitfinex, Bybit, Gate io, Bitrue, and Kucoin have announced support of the newly modified version of Terra. Binance, the global cryptocurrency exchange stated that it was “working closely with the Terra team on the recovery plan,” while FTX announced that it would support the “new LUNA airdrop and suspend LUNA and UST markets.” Interestingly, Binance CEO Chengpeng Zhao earlier criticized the hard-fork plan to revive the Terra blockchain ecosystem. He even went on to advise that “burning of Terra coins could help”. Burning essentially means sending a particular token to a dead wallet so that it can never be retrieved, in short reducing the supply of the coin, which eventually increases the demand.