By 
Terra believes burning UST and increasing the pool of Luna are good ways to boost the recovery for both while creating an excess of UST.
Source: Twitter
1/ The prevailing peg pressure on $UST from its current supply overhang is rendering severe dilution of $LUNA.
The primary obstacle is expelling the bad debt from UST circulation at a clip fast enough for the system to restore the health of on-chain spreads.
— Terra (UST) 🌍 Powered by LUNA 🌕 (@terra_money) May 12, 2022
USTUSD up +95.16%, LUNAUSD down -97.40%
Terra stated that the major obstacle is removing the bad debt from UST circulation at a faster rate to restore the health of on-chain spreads.
Algorithmic stablecoins like UST are expected to be automatically pegged to the price of another currency.
A token burn involves taking a cryptocurrency out of circulation on the blockchain. A process is a deflationary event because it boosts the value of the remaining blockchain.
In a new proposal, Terra stated that it wants to burn close to $1 billion UST (almost $690 million) in the community pool by increasing the Base Pool of LUNA available to 100M that expanding minting capacity to over $1B.
The proposal will help to expedite the outflows of UST from the system, pushing it back closer to its peg while reducing the price of Luna.
Comments