In response to the de-pegging of UST, trillions of LUNA coins were minted due to the nature of the Terra LUNA algorithm used to maintain the UST dollar peg. LUNA is used in the Terra blockchain’s governance, which is now under threat due to the low value of each coin.
There have been several controversial moments concerning the current voting system in the past week. One of the most significant issues is that new proposals are now being censored due to increased spam proposals.
The three main controversies are:
- The main proposal supported by Do Kwon was changed after the vote went live, and millions of votes had already been cast.
- A proposal to burn the remaining community pool of UST passed the vote but seemingly failed due to technical reasons.
- Many proposals have been submitted due to the low cost following the 99% drop in LUNA’s value.
Some of these controversial aspects of the voting system may have caused further concerns about the centralization and reputation of the Terra blockchain.
Main Terra Luna fork proposal changed mid vote.
Terra announced the main proposal was announced on Twitter. While users can change their vote mid-proposal, it is controversial since not every voter will be watching Twitter daily. Some voters may now be supporting an initiative that they disagree with as they voted for a previous version of the proposal. The official Terra Twitter account has pinned a tweet detailing the amendment. However, there is no guarantee all voters will see this.
1/ We have published an amendment to Proposal 1623, incorporating the community’s feedback since its publication 2 days ago. Please see below for details 👇https://t.co/liISBn3Baa
— Terra 🌍 Powered by LUNA 🌕 (@terra_money) May 20, 2022
The three revisions are:
- Increasing genesis liquidity
- Introducing a new liquidity profile for pre-attack $LUNA holders
- Decreasing distribution to post-attack $UST holders
There are still several days left before the voting closes. Any voter who wishes to change their vote after reviewing the amendment to the proposal may do so via the Terra Station voting portal. The proposal has reached a quorum and has 61% “Yes” votes. The proposal would fail only if the “No with veto” votes increased from 16% to 33% before the May 25 deadline. The largest validators voting against the proposal are stake.systems, DSRV, and Figment with almost 10% of the voting power.
A proposal to burn UST failed after being passed.
A proposal to burn the remaining UST left in the community pool passed with 91% “Yes” votes and 0% “No.” However, the proposal can apparently not be actioned due to an “incorrect parameter.” FatManTerra pointed out;
I don’t know why more people aren’t talking about this.
1. A proposal is made to burn 1.4B UST from the Community Pool (this would reduce UST liabilities by 11%)
2. The vote passes via LUNA governance
3. The proposal disappears…
Is governance even real?
The rationale for the proposal’s failure is that an incorrect amount of UST was listed in the burning parameter. When the proposal was executed, a lower amount of UST was left in the pool. A detailed explanation is shown below.
The proposal has since been resubmitted and is live for voting, with 89% voting “Yes.” Roughly a further 75 million LUNA is required to reach a quorum. Interestingly, the pool with the most significant voting power to vote against Do Kwon’s proposal has not voted on the proposal. The proposal has five days left before it closes. Whether the remaining UST will be burnt as the original chain continues under the LUNC ticker remains to be seen.
Spam proposals cause congestion due to low fees.
The Terra Twitter account released a statement that there has been a considerable increase in the number of spam proposals due to the drop in the value of LUNA.
1/ Recently, bad actors have been capitalizing on Terra-related events by purchasing $LUNA & posting fake proposals on Station with phishing sites quoted in the link. These proposals claim to lead users to a preview of Terra 2.0 & dApps launched by us – which is not the case.
— Terra 🌍 Powered by LUNA 🌕 (@terra_money) May 20, 2022
It has thus hidden new proposals under a “show all” tab which is off by default. While Terra has cited protecting users from “phishing sites quoted in the link” as the reason for the move, it appears to be a move away from true decentralization when the entire world is watching.
For a new proposal to be viewable on the main voting page, it must now be added to an “allowlist.” To be included in the allowlist, users must submit a pull request from the Whitelist proposal 1273. It is vital to protect users who have probably already lost a lot of money due to the project.
Further, it is reasonable to assume that they would be more susceptible to potential scams given the heightened emotional states of many who have lost significant amounts. Still, when the only solution to spam proposals is to create an allowlist that requires core developers to agree to let a proposal through, the underlying governance system has to be held into question. You cannot have a decentralized ecosystem with core developers acting as gatekeepers to new proposals.
Overall, those who have said that Terra is a dead project may well view these final moments of the original Luna blockchain to confirm their belief. How the developers on the Terra ecosystem will attempt to salvage anything from the current state of the blockchain is hard to see.
A fork without UST creates a blockchain valued only by the strength of its governance. In the dying days of what will become Luna Classic, there are now many severe concerns regarding the ability of the governance system to perform.