Terraform Labs founder Do Kwon announced an on-chain governance proposal Wednesday morning, despite minimal community support for the results of a preliminary online poll on a hard fork plan.
"Terra Governance Prop #1623 to rename the existing network Terra Classic, LUNA Classic ($LUNC), and rebirth a new Terra Blockchain & LUNA ($LUNA) is now live," Kwon tweeted. He added that the proposal has the support of more than fifteen "Terra builders."
A hard fork means forking a chain that runs a particular protocol with different rules than the existing one, resulting in two separate blockchains. One chain then becomes the "main chain," even though both blockchains continue to exist as long as there is validator and community support.
According to the proposal, the new chain would completely exclude the failed UST product and instead focus on decentralized financial applications (DeFi) built on Terra, as reported. 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, according to the plan.
At the time of writing, about 64% of voters on the on-chain proposal supported the spinoff, while 34% voted against it.
The community, however, is clearly not on board. About 92% of more than 6,220 voters voted against the change in a previously conducted online poll, with the most popular responses calling for "no fork."
Anyone can participate in the online off-chain vote, regardless of whether or not they own Luna tokens (LUNA), unlike on-chain votes where voters must own Luna tokens before they can vote. Most comments discussing the proposal are negative. Some even call it "anti-community," while others urge legal intervention.
Why are most voting no?
Market observers say a lack of trust in Terra and Kwon may have led to the preliminary online vote being overwhelmingly negative.
"The biggest challenge the Terra community has against a new fork as proposed by Do Kwon is trust," Dmitry Mishunin, founder of DeFi security firm HashEx, shared in a Telegram chat. "Should the team decide to proceed with the new fork, it will be necessary to increase trust," he added.
"As such, Terra must approach the fork with all responsibility and conduct additional checks for vulnerabilities," Mishunin added.
Anton Gulin, a regional director at crypto exchange AAX, echoed the comment, saying, "The general sentiment towards Luna in the crypto community is extraordinarily damaging. Traders and investors have suffered huge losses and are doubting management's actions following the UST unpegging."
"Anything coming from the Luna team can be treated in the same way, as the lack of trust is prevalent. It is now more of a speculative asset than a representation of a Tier 1 ecosystem. The chances of consensus are very low," Gulin shared.
Meanwhile, some prominent fund managers say Terra's leadership team could forge the blockchain, regardless of the community's sentiment toward the project.
"It's a dilemma for Kwon and Terra's team, as they can technically override community consensus by either forking regardless of the decision or using their Luna stakes (to prevent the network from being manipulated) to change the vote to support," Doo Wan Nam, founder of crypto fund Stable Node, said in a Telegram chat.
"This will be very badly received not only by the Terra community, but by the entire crypto community. But Do and his team may have no choice but to do it to better reflect his vision of the Terra ecosystem," Doo added.
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 tweets earlier this week.
Last week, Terra's LUNA tokens fell 99.7% as the U.S. dollar-pegged stablecoin terraUSD (UST) lost its peg and fell below 10 cents, leading to an outflow of funds from the Terra ecosystem and sinking sentiment for the project in the crypto community.