The Terra ecosystem, which includes algorithmic stablecoin terrausd (UST), experienced a significant setback almost a year ago when the token detached from the U.S. dollar. However, supporters of the Terra Classic blockchain community have proposed a plan to revive the ecosystem by restoring USTC’s peg with the U.S. dollar. This proposal has caused the value of USTC to increase by over 9% in the past 24 hours.
The Terra Classic community aims to restore the value parity of the algorithmic stablecoin by implementing a dynamic fee structure. The proposal, submitted by a community member under the pseudonym “Redlinedrifter,” suggests the “Divergence Protocol” idea. This mechanism would impose a fee proportional to the deviation between the $1 peg and the token’s market value. The community believes that the divergence fee structure would address the challenges that had hindered USTC’s ability to maintain its U.S. dollar peg.
Redlinedrifter acknowledged that Do Kwon’s decentralized money creation was a positive initiative. However, the community member emphasized that “serious issues need to be addressed” to re-establish the token’s value peg with the U.S. dollar. This is not the first time the Terra community has proposed revamping Do Kwon’s stablecoin idea. In October 2022, a new “soft-pegged stablecoin” concept built on the Terra Phoenix network was introduced in a white paper.
The proposed revitalization plan has caused USTC to increase in value by 9% against the U.S. dollar. After reaching a low of $0.0195 per unit on Friday, USTC has risen to a high of $0.0218 per coin as of 1:15 p.m. Eastern Time. The Terra Classic proponents hope that the innovative approach of the Divergence Protocol will solve the challenges faced by algorithmic stablecoins.
The proposed community proposal has generated significant interest and discussion among industry experts and enthusiasts. Jamie Redman, the News Lead at Bitcoin.com News, has written extensively about the disruptive protocols emerging in the industry. Redman believes that the Terra Classic community’s proposed Divergence Protocol is a positive step towards addressing the challenges faced by algorithmic stablecoins. However, he emphasizes that the success of the mechanism will depend on its implementation and adoption.
In conclusion, the Terra Classic community’s proposed Divergence Protocol aims to revive the ecosystem of the algorithmic stablecoin, USTC, by restoring its value parity with the U.S. dollar. The community believes that the proposed dynamic fee structure will address the challenges that had hindered USTC’s ability to maintain its U.S. dollar peg. The proposal has generated significant interest and discussion among industry experts and enthusiasts, with many hoping that the innovative approach will solve the challenges faced by algorithmic stablecoins.