People will have lost trust. Part of the problem is many will wonder what is going to be different this time around that they should trust putting their money in. I support various initiatives. I have one more mechanism to suggest:
A mechanism that people can use to exit half their position at US$1 into a choice of some other stables where the other 50% is then locked in UST earning whatever the interest rate is. This lock up period could be set to long enough that it would likely to be well past the immediate de-peg issues. For example, it is a 3 month lock-up.
If this had been in place, many might have used this to exit half their position with the remaining 50% of their position becoming a form of locked collateral for the protocol for the next 3 months. If enough users utilized such a mechanism in a crisis then their own action in exiting could help smooth out the downward spiral and creating a floor in the value.
This mechanism might also be a forcing function pushing exchanges etc to provide exchange at or close to $1.
Hope that idea is of some value. Thanks for considering it.
Sounds like OUSD, where you are guaranteed 1/3:1/3:1/3 redemption of OUSD into USDC, USDT and DAI and there is 1:1 backing.
That would be basically Terra giving up on the whole premise of ‘algorithmic stablecoin’ and just using centralized, but backed (or supposedly backed, in case of USDT), stables. In other words, that would be a model for Anchor (similar to OUSD) without the need for Terra.
Thanks for your reply. Is that a bad thing at this moment? To be clear, I’m not suggesting a 1:1 backing for the protocol but that users can effectively back it in their rush to the exit, thus reducing the stampede.
Given that this could be run by Anchor but also could be an initiative set up by others, then maybe it doesn’t have to be adding to the centralization. More decentralization and more automated systems that are simple and hard to game would be good.
Perhaps it’s a slippery slope but wasn’t the guard initiative backing the protocol with BTC? Also I thought I saw a tweet from Do in the last 12 hours or so stating they would be looking at backing? So I was thinking this sort of thing might be up for discussion. If not, sure I understand.
I want to amend my suggestion slightly:
I think that when a user utilizes this exit mechanism, they get their 50% paid out at $1 but it takes 48 hours to clear. This time penalty I hope reduces the likelihood that it can be used as part of an attack on the protocol but is instead there as a backstop for users of the system.
Not at all. In fact, given the loss of faith in any of the Terra stablecoins, it’s a good thing. At the moment. But it does render several differentiating factors to Terra inconsequential. I guess the jury’s still out are the factors unique to Terra good or “bad.”
I do think that the BTC backing was a mistake. Anything volatile and crypto is. Other stablecoins backing would then make UST dependant on those centralized SCs, changing the whole premise of Terra. But, it would provide more stability. May be happier middle ground would be for LFG to build a few large gold (and may be silver and other metals) vaults in different countries, and to have 1:1 or greater backing by gold. Still not 1:1 USD value, but much less volatile. (The point being that it’s much harder to manipulate the price of gold than BTC. Then again, looking at the nickel fiasco of not long ago, metals prices still can be in for a wild ride as well…) But again that would change the whole nature and make it centralized, and add a lot of regulatory and other requirements to meet.
Yes, an uncorrelated asset mix would have been better than having to prop up Terra by dumping their BTC reserves which dumps the BTC price which dumps all of the crypto market which dumps Luna further which puts more pressure on the UST peg.
Alias, many of us are a lot poorer today because it didn’t work out how Do thought it would and because we believed he knew something beyond what we could see. I certainly ignored my concerns about the approach being taken and also failed to read the signs so have UST that is nowhere near worth a dollar.