Terra, the “stablecoin” that shocked the cryptocurrency world when its value plummeted despite its promise to be perpetually equal to the US dollar, is being rebooted in an effort to recover the money lost in the fall.
Terra 2.0 launches this morning, with the notable difference of not being tied to the value of the US dollar. The plan was approved in a vote on Wednesday held by Terra investors that won with a 65% vote share.
The originally theorised benefit of stablecoins, as opposed to other forms of cryptocurrency, was reduced volatility in an often frenetic market.
This illusion of stability is in part what gave Chancellor Rishi Sunak and the Treasury the confidence to declare that stablecoins would be integrated into the UK economy.
However, this move away from value pegging may be a sign that stablecoins as we know them are entering a different trajectory.
The Treasury told UKTN at the time of the crypto crash that it still intended to incorporate crypto into the UK. It’s unclear what that plan will look like now that one of the world’s most popular stablecoins has been forced to reboot using a different model.
Terra is ‘distressed’ but has ‘strong brand recognition’
The new tokens will be handed to a significant proportion of those involved with the original iteration of Terra, particularly to those who owned both Terra coins and Luna coins as of 7 May.
The value of the stablecoins began dropping on 9 May, with a dramatic fall in value from $1 to just $0.09.
The new token is intended to act as repayment to those that lost large amounts of money when the crypto market crashed.
“While UST [Terra’s stablecoin] has been the central narrative of terra’s growth story over the last year, the distribution of UST has led to the development of one of the strongest developer ecosystems in crypto,” said Terra founder Do Kwon.
“The terra ecosystem and its community are worth preserving. Terra’s app ecosystem contains hundreds of developers working on everything from defi to fungible labour markets, state-of-the-art infrastructure, and community experience. “
There is no guarantee that the value of the rebooted token will hold any better than its predecessor. However, Kwon believes there is enough value in the brand of Terra to encourage investors old and new to support the latest iteration.
“Although distressed, [terra has] strong brand recognition and a name that almost everyone in the world will have heard about,” Kwon said.
Whether the brand recognition Terra had before the crash, supplemented by the much greater level of recognition that came about after the crash, will be helpful in sustaining the value of Terra 2.0, remains to be seen.