Terra's LUNA has lost nearly a quarter of its value in the last 24 hours after founder Do Kwon revealed plans to revive the blockchain.
LUNA rose as low as $0.00022 on Monday evening as plans to fork the current Terra blockchain went viral on social media. In the early Asian hours, the price fell as much as 22% and was at just over $0.00017 at press time. In the last 24 hours alone, $2.1 billion worth of tokens were traded.
The token has fallen more than 99% since its peak of nearly $120 in April. The decline came as surplus LUNA was circulated last week to prevent the collapse of terraUSD (UST), a stablecoin pegged to the U.S. dollar in the terra ecosystem, according to reports.
Last night, Kwon proposed to transform Terra into a new chain that would completely exclude the failed UST product and instead focus on decentralized financial applications (DeFi) built on Terra.
The current chain would continue as Terra "Classic," while holders of LUNA on the "Classic" chain would receive token airdrops on the new chain's token under the plan. Although still a proposal, the new network could launch as early as May 27 if a majority of network validators and the community approve the plan, Kwon said.
In the crypto community, sentiment for the proposal remains mixed.
Some said they would support the new chain and expected the airdrop for existing holders. Others said the plan was unfair, as it could heavily favor investors who bought large amounts of LUNA for a few cents more over those who bought the tokens when they were worth more than $100. To counter this, Kwon suggested taking two snapshots - one before and one after the UST collapse - and throwing an equivalent amount of new tokens into the air.
Plans to compensate "relatively small" holders of UST and LUNA affected by last week's collapse are also in the works, Kwon said.
Despite the crash of LUNA and UST last week, some market watchers remain optimistic about the longer-term prospects of algorithmic stablecoins, which are typically backed by other cryptocurrencies and rely on traders buying and selling the underlying tokens to continuously maintain their peg.
"We are still in the early days of algorithmic stablecoins," Brian Gallagher, co-founder of Partisia Blockchain, said in a Telegram message over the weekend. "There will be many failures along the way to keep the peg going as they are mainly in the experimental phase. We have to accept the failures along the way."
Critics, however, compared protocols designed like UST to those of a Ponzi scheme. "It sounds like the crypto version of a Ponzi scheme," billionaire Pershing Square Capital founder Bill Ackman said in a tweet Tuesday. "Investors have been promised 20% returns, backed by a token whose value is determined only by new investor demand for the token. There is no underlying business."
"Schemes like Luna threaten the entire crypto ecosystem. The crypto industry should self-regulate other crypto projects without underlying business models before crippling regulation cripples the good and the bad," he added in a follow-up tweet.