Cryptocurrencies have had it quite rough this year, with Bitcoin (BTC) falling for several weeks. The biggest loser has however been Terra (LUNA), which had fallen from $85 earlier in May to a fraction of a penny now. Terraform Labs, the company behind the Terra blockchain is now staging a comeback.
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This was noticed when Terra’s official Twitter account followed a newly created account @enterprise _dao with the bio “Building a new standard for DAOs on Terra” on Friday.
According to a source close to the matter who requested anonymity to discuss private business matters, the “Enterprise Protocol” is intended as a new standard infrastructure for building DAOs on the Terra blockchain.
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Notably, The UST stablecoin is no longer used by Terra when it migrated to a new chain known as Terra 2.0 on May 28.
The de-pegging of TerraUSD (UST), a stablecoin designed to maintain a $1 value at all times, was the cause of Luna’s fall. Unlike stablecoins such as Tether (USDT) and USD Coin (USDC), UST is not backed by US dollar reserves. Instead, it is an algorithmic stablecoin that is pegged to the terra blockchain’s native cryptocurrency, LUNA.
Even if the value of one UST fell below $1, it could always be exchanged for one luna. The idea was that if the US dollar was devalued to 99 cents, arbitrage traders would buy up large amounts of UST and exchange them for LUNA. (Full explainer here).
On May 8, the system failed when $2 billion in UST was extracted all at once, with hundreds of millions of dollars sold. The mechanism for exchanging UST for LUNA couldn’t keep up as UST depreciated to 98 cents. As a result, investors lost faith in the system, and both UST and LUNA crashed. The crash destroyed over $17 billion in cryptocurrency.
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Terra (LUNA): Anew from the Ashes
Terraform Labs CEO Do Kwon said a few weeks ago that the UST peg failure is “A chance to rise up anew from the ashes.” He has also shown his support for the developers building the Terra 2.0 ecosystem creators by tweeting “Let’s leave them alone to build.”
On Friday, Terra also began following the brand-new @Entropic Labs on Twitter, a “decentralized and secure on-chain randomness source” that is now deployed on Terra.
The launch of the Enterprise Protocol will determine whether Terra’s builders can restore the ecosystem’s tarnished reputation. According to a source, the DAO will soon have a website and documentation.
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