End of TerraUSD Classic Minting: A Step Towards Stability and Recovery

End of TerraUSD Classic Minting: A Step Towards Stability and Recovery

Crypto News – The Terra Classic protocol has officially ceased minting TerraUSD (USTC), the once-infamous stablecoin that experienced a drastic 99% depreciation during the downfall of the formerly soaring Terra protocol in 2022.

A recent community poll on Terra Classic’s governance forum, concluding last week, achieved a 59% approval rate to halt all USTC minting. Presently, the value of USTC stands at 1 cent as of Monday afternoon.

Terra Classic, the original network established by Terraform Labs, has persevered as an autonomous blockchain, distinct from Terra 2.0—a forked version that emerged in the aftermath of Terra’s collapse.

TerraUSD played a pivotal role in Terra’s downfall, precipitating a staggering 99.9% plunge in LUNA token prices. This collapse resulted in a massive $28 billion drain from DeFi applications based on Terra and ultimately set off a chain reaction leading to the insolvency of numerous crypto funds.

Community members believe this decision will safeguard users and external investors who are actively burning USTC to aid in achieving re-pegging. “Burning” involves permanently removing tokens from circulation by sending them to an address beyond anyone’s control.

USTC, akin to algorithmic stablecoins, relies on a collection of assets like LUNA and bitcoin (BTC) for backing, eliminating the need for a centralized third party to custody these assets. However, many such tokens often succumb to a “death spiral,” where outflows or asset sales result in a sudden de-pegging of projects akin to USTC.

Originally designed to maintain a peg of $1 through this mechanism, USTC enthusiasts had hoped that burning tokens would eventually help USTC regain its intended value. Nonetheless, this ambition might necessitate the incineration of trillions of tokens.

The proposal stated, “Any form of minting or reminting goes completely against any community effort.” It emphasized the concern that allowing institutions such as Binance to start burning USTC, now that minting and reminting have ceased, could become a possibility.

These proposals and actions represent a concerted effort by a small group of engineers striving to restore Terra to its former prosperous state.

A faction identifying themselves as the “Samurai Six” actively engages in developing applications on Terra Classic and devising rewards to incentivize network developers, as previously reported by CoinDesk.