He acknowledges that the previous 72 hours have been tremendously difficult on the whole Terra community. He says he is determined to work with every member of the community to weather this catastrophe, and that together, a way out will be out.
The Price Stabilization Mechanism
The price stability mechanism is absorbing UST supply (more than 10% of total supply), however the expense of absorbing so many stablecoins at once has increased the on-chain swap spread to 40%, and Luna price has dropped drastically as a result of absorbing the arbs.
The Only Path Forward
The only way ahead is to absorb the stablecoin supply that wants to depart before $UST begins to repeg. There is no getting around that, says Do Kwon.
They recommend a number of corrective approaches to help the peg mechanism absorb supply
A Community Proposal Is Endordsed
Terra supports the community proposal 1164 to boost the basepool from 50M to 100M SDR *), reduce the PoolRecoveryBlock from 36 to 18 and increase minting capacity from $293M to $1200M.
This should help the system absorb the UST faster.
The Pressure On The Ecosystem
With the present on-chain spread, peg pressure, and UST burn rate, the UST supply overhang (i.e., bad debt) should continue to decline until parity is achieved and spreads begin to heal.
Do Kwon remains positive about a recovery
Terra’s Focus Remains Unchanged and the community will survive
Terra’s emphasis has always been on the long term, and another setback in May, similar to last year, will not dissuade the #LUNAtics. Short-term setbacks do not determine what you are capable of, wrote on his last tweet.
We Hope The Terra Ecosystem will recover and will rise back.