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Community Decision: Terra Classic Halts USTC Minting Amid Ongoing Revival Initiatives

Sep 26, 2023 at 10:31 am

TerraUSD Classic, the stablecoin at the heart of Terra's previous challenges, is going to halt its minting process.

Following a community vote held on Terra Classic's governance forum, which concluded last week, 59% of participants voted in favor of discontinuing all USTC minting. As of Monday afternoon, the current value of USTC is at 1 cent.

Terra Classic, which originated from Terraform Labs, has persisted as an independent blockchain, distinct from Terra 2.0, a modified version that emerged after the collapse of the initial Terra protocol in 2022.

TerraUSD played a critical role in Terra's downfall, resulting in a staggering 99.9% drop in LUNA token values, a loss of $28 billion from Terra-based DeFi applications, and ultimately leading to financial hardships for crypto funds.

Community members believe this move could protect users and external investors who are participating in the burning of USTC to facilitate the repeg process. Burning involves permanently removing tokens from circulation by sending them to an address not controlled by any entity.

Algorithmic stablecoins like USTC are backed by a combination of assets, including LUNA and bitcoin (BTC), without relying on any centralized third party for custody. However, many tokens often face a "death spiral," where outflows or sales of underlying assets result in a sudden de-pegging, similar to projects like USTC.

The intention was for USTC to maintain a peg of $1 through this mechanism, and members hoped that burning tokens would ultimately help USTC achieve that goal. However, achieving this might require burning trillions of tokens.

"The proposal stated, 'Any form of minting or reminting goes completely against any community effort.' It further noted, 'Most importantly, this proposal opens the door for institutions like Binance to start burning USTC knowing that the minting and reminting is over.'"

These proposals and actions are part of a small group of developers striving to restore Terra to its former prominence.

A collective known as the "Samurai Six" is actively engaged in building applications on the Terra Classic network and offering incentives for developers contributing to the ecosystem, as previously reported by Bitsday.

These endeavors aim to ultimately enhance the value of the Terra Classic ecosystem and, hopefully, lead to a rise in LUNC value over time.

Read more: Crypto Debt Market Surges: FTX Claims Trend

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