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- This choice demonstrates the community’s dedication to restoring ecological balance.
- The community hopes to forestall more crises and preserve the worth of its assets.
The algorithmic stablecoin, earlier known as UST Terra Classic USD (USTC), has recently had its minting and reminting halted by the Terra LUNA Classic (LUNC) community. The de-pegging of the UST posed a difficult choice for the community of Terra Classic. A proposal to end the USTC-LUNA swapping mechanism was made to protect the interests of the investors.
Users were able to easily swap UST and LUNA using this technique, but it has proven to be quite fatal at times of crisis. In a majority-approval vote, the Terra Classic community has decided to end the swapping system.
Avoiding Future Catastrophe
Moreover, this choice demonstrates the community’s dedication to restoring ecological trust and balance. The community hopes to forestall more crises and preserve the worth of its assets by halting further minting and reminting of USTC.
The problems started in May of 2022 when UST, the stablecoin that underpinned Terra’s financial ecosystem, de-pegged to the USD. This sudden turn of events caused a domino effect that rocked the community to its foundations. A crucial mechanism meant to ensure stability failed spectacularly when the UST price dropped.
As a response to the de-pegging, a record amount of LUNA tokens were minted. The market was inundated with trillions of LUNA to maintain the value of UST. Unfortunately, this action resulted in a surplus of LUNA. The issue was exacerbated when additional LUNA tokens were minted, reducing their value and driving the price of UST further below its intended peg.
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