More than 99.9% of the vote approved the proposal, which will reduce the supply of Terra’s stablecoin UST by about 11%.
Destroy UST to Restore Terra Economy
The vote on Terra’s 1747 proposal to burn 1.388 billion UST stablecoins passed. This will reduce UST’s supply by about 11% from its total supply of 11.28 billion tokens, according to data from CoinMarketCap.
More than 99% of all 154 million votes supported the proposal. Less than 1% abstained and about 10,000 voted against the proposal.
The primary goal behind the proposal is to reduce debt within the Terra economy and help restore the stablecoin’s dollar peg.
Of the total of 1.388 billion UST to be destroyed, the Terra Community Pool contains 1.017 billion UST. The remaining 371 million UST comes from the cross-chain bridge on Ethereum. Terra’s community pool funds can only be used after successful Terra Community approval.
“If this proposal succeeds, the 1.017.233.195 UST from the Community Pool will be sent to the Community Core Burn module,” is in the proposal. “In addition, the 371 million cross-chain UST back to Terra will be bridged and burned.”
The proposal stated that burning UST tokens would help alleviate peg pressure on the crashed algorithmic stablecoin. The high reward on on-chain swap spread (or arbitrage between UST and LUNA) is the main driver of the economic burden on the Terra ecosystem, according to the proposal.
The current UST burn rate is too low, making it difficult to remove the economic burden from the ecosystem. Hence the accelerated manual destruction, the proposal explained.