Vitalik Buterin, the co-founder of Ethereum, thinks that the beleaguered Terra project should prioritize small HODlers as part of any proposed reimbursement plan.
It has been reported that the Terra ecosystem suffered a death spiral around May 9 which resulted in Terra (LUNA) tanking 100% and the TerraUSD (UST) stablecoin losing its United States dollar peg, priced at $0.16, as of May 15.
However, with LUNA and UST investors reeling from substantial losses, the community is now looking at ways to reestablish the ecosystem and potentially offer relief to the many people who got burned financially.
The report said that one such community proposal, assuming the UST dollar peg is eventually stabilized, is to first reimburse all of the initial deposits (not yield) of small UST holders to “greatly improve general morale and sentiment” while figuring out how to sort creditors and larger investors later. The payout is estimated to cost between $1 billion to $1.5 billion.
Likewise, Buterin showed support for the idea via Twitter on Sunday, noting that the focus should be on the smaller investor who needs the money, before going a step further by suggesting that the whale hodlers should cop the loss.
“Coordinated sympathy and relief for the average UST smallholder who got told something dumb about ‘20% interest rates on the US dollar’ by an influencer, personal responsibility and [sorry for your loss] SFYL for the wealthy.”
While the Ethereum co-founder didn’t explicitly call for regulation, he did highlight that potential covers such as financial deposit insurance could be useful in these circumstances.
“An interesting unrelated one is Singapore employment law. Stronger regulation for low-earning employees, and a more figure-it-out-yourself approach for the wealthier. IMO things like this are good hybrid formulas.”
Thus, at this stage, it is unclear if the project will be able to rebuild or if it will aim for a temporary resurgence to recoup investor losses, however difficult that may be. It is also worth noting that the proposal relating to Buterin’s comments was updated over the week and is now weighing up paying out all users up to a per-wallet cap of $50,000.