In a bid for survival that has received majority support from its community, Terra is forking its blockchain and ditching UST, the algorithmic stablecoin that collapsed in dramatic fashion two weeks ago.
“The distribution of UST has led to the development of one of the strongest developer ecosystems in crypto. The Terra ecosystem and its community are worth preserving,” Do Kwon, Terra’s embattled founder, wrote in his proposal to abandon the stablecoin and create a new blockchain. UST’s collapse “is Terra’s DAO hack moment – a chance to rise up anew from the ashes.”
The vote opened last week and ended on Wednesday. Kwon’s proposal needed a simple majority to pass, but easily crossed that threshold; wallets holding 65.5% of Terra’s governance token, LUNA, voted in favor. Addresses holding almost 21% abstained while less than 14% voted in opposition.
Large Validators Abstain
While the proposal garnered adequate support, many large LUNA holders remain unconvinced.
The single largest voter was Orion Money, a validator of the Terra blockchain, with almost 10% of the total voting power.
“While it seems to be the most comprehensive proposal so far, we received very split opinions from the Orion community about it,” Orion said. “After long and hard consideration and due to such incomplete community feedback, Orion validator voted [to] Abstain.”
The third-largest entity by voting power, validator Smart Stake, also voted to abstain.
“This is the biggest governance vote in the history of Terra,” Smart Stake, which had almost 4% of the voting power, said. “Given the significance of this proposal and the diverse set of delegates staking with Smart Stake, we were unable to arrive at any one outcome.”
Validator Stake Systems, with 4% of the voting power, was opposed to the proposal.
“Terra 2 should be a pre-crash fork chain that has nothing to do with Terra 1, other than the chain state,” they wrote. “It needs new leaders with different points of view so that the chain can move in a different direction.”
A proposal to burn UST in an attempt to restore it to its 1:1 peg to the US dollar also passed, with nearly unanimous support. That proposal will burn the 1 billion UST in the community pool, reducing its supply by about 8%, according to its author.
The vote “will effectively create a new Terra chain without the algorithmic stablecoin,” Terra announced on Twitter. “The old chain will be called Terra Classic (Ticker: $LUNC), and the new chain will be called Terra (Ticker: $LUNA).”
The new chain has passed an audit from SCV Security, and will launch Friday. When it does, LUNA will be airdropped to LUNA Classic stakers and holders, UST holders and “essential app developers of Terra classic.”
TerraForm Labs and the Luna Foundation Guard will not be eligible for the airdrop, “making Terra a fully community-owned chain,” Kwon wrote.