It should be noted that the incidents with the project did not end with LUNA falling almost 100 per cent in value. In particular, the community is now divided over an initiative by the team’s developers and project founder Do Kwon among others.

They want to do a fork of Terra, creating a separate new network called Terra. Its main difference will be the absence of the UST algorithmic stackcoin, which among other things was the reason for the current collapse. However, the new blockchain will have a token called Luna (LUNA), which, among other things, will be accrued and distributed to Luna Classic holders and stackers on the Terra Classic network, i.e. the current chain.

Voting for a corresponding decision is now underway on the website, with more than 82 per cent of the votes in favour of the fork.

Voting for the Terra Luna fork

Meanwhile, regular LUNA holders are predominantly opposed to the initiative. They do not want to create a new blockchain, which from their point of view would be completely useless and without any value. Instead, they suggest burning the LUNA tokens issued after the UST problems began.

It is important to note that project representatives - and Do Kwon among them - actively support the idea of a hardforward, meaning it is more beneficial to them. Apparently, the conflict within the Terra community will only intensify in the future.

What will happen to LUNA

Here is one of Ackman’s quotes published by the news outlet Decrypt.

Investors were promised returns of 20 per cent per annum, backed by a token whose value is only determined by demand from new investors in the token. There is no fundamental underlying business here.

The 20 per cent yield mentioned refers to the opportunity for investors to interact with Terra’s Anchor Protocol platform via UST. Admittedly, investment returns have recently begun to fall, and the project itself has become almost pointless to invest in. Ackman also criticized the LUNA team for creating artificial demand by limiting supply through vesting.

To recap, vesting is a common investment practice whereby an investor’s tokens are locked up for a certain period called “lock-up” after which they can receive them in installments over a certain period of time. In the case of LUNA, if an investor purchased LUNA during the project’s sid-round, the tokens were locked for a period of 10 to 18 months. After the lock-in period, the tokens could be withdrawn.


In other words, many of the initial investors' coins were blocked, the expert notes. And this not only limited the number of tokens in circulation, but in addition reduced the possible pressure of sellers on the cryptocurrency rate. In other words, favourable conditions were specifically created for the growth of the coin's value.


Billionaire Bill Ackman

Read also: What happened to Terra's cryptocurrency reserves after the collapse of Luna and UST?

Another round of criticism – this time regarding the entire industry – was voiced by Paul-Willem van Gerwen, head of capital markets supervision and transparency at the Dutch Financial Markets Authority (AFM). He stressed that despite – or because of – the growing interest in cryptocurrency derivatives trading, the authority sees “such trading as risky”. In addition, experts see the market as less mature than other derivatives markets.

The financial regulator’s management believes that crypto derivatives transactions should be limited to wholesale trading. The official admitted that, unlike their UK counterparts at the Financial Conduct Authority (FCA), their agency has not banned such trading. However, he hinted that such an outcome is still likely. Here’s the quote quoted by Cointelegraph.

Don’t succumb to the excitement of trading; don’t let yourself be tempted by “easy money”. Cryptocurrencies and derivatives are not yet suitable as a means of payment and investment.


A similar comment about Bitcoin's weak potential as a means of payment was made the day before by former US Federal Reserve Chairman Ben Bernarke. However, it is easy to question the truthfulness of this point of view.


Payment in cryptocurrencies


We think Terra does deserve criticism because of the current situation. Even despite mentioning the eirdrop of the new coin, the prospect of its accrual to LUNA investors is unclear - as well as the possible value of the forked cryptocurrency. In addition, Luna holders are now more interested in compensation for their huge losses than in the new project. In addition, its future, taking into account what happened, is absolutely unclear. How many will risk getting involved with Do Kwon's latest brainchild?


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