The Terra Classic (LUNC) L1 team plans to create a test environment to ascertain the conditions of the USTC depeg and simulate a potential re-peg event.
The L1 Joint Task Force (L1JTF) seeks to create a test environment to explore the various ideas aimed at facilitating the USTC re-peg. LuncBurnArmy (LBA), the project manager of the L1JTF, introduced the concept in a recent tweet, sharing a link to the dedicated Agora text.
1. #LUNCCommunity please see the following proposal which would authorize the L1 Task Force to build a USTC test environment. Note: We are focused solely on parity right now, and this will not take any time away from that effort con't. https://t.co/CEtEXF3LQe
— 🔥LuncBurnArmy🔥 (@luncburnarmy) May 23, 2023
According to the text, the proposal does not require any additional community funds, as it will use the existing budget allocated for the L1 team. The L1JTF plans to fund the creation of the USTC test environment with part of the compute budget allocated to them for the Q2 work.
The L1 Task Force believes that creating a USTC test environment will help them explore various ideas and solutions for restoring USTC’s peg to the dollar, which remains one of the primary objectives of the revitalization goal along with reducing LUNC’s extensive supply.
Notably, the LUNC community has witnessed numerous proposals aimed at facilitating the re-peg. One such proposal involved using a divergence protocol for penalizing USTC traders who attempt to sell the asset below the peg (that is, $1). The proposal also aims to use buybacks and swaps to enforce and maintain the re-peg.
The USTC Test Environment
The L1 Team seeks to test how these proposals would work in the environment. The test environment will also allow them to simulate various scenarios and collect data on how USTC behaves under different market conditions. The potential uses of the USTC test environment are:
- Reproducing the depeg event and testing possible capital controls that could have prevented or mitigated the “death spiral” that it caused. An example of such controls involve limiting the maximum supply of USTC.
- Simulating a repeg event and finding the optimal mechanism and timeframe for achieving it. This would involve facilitating the previously-mentioned divergence fee idea as well as employing a volume-based strategy with a deflationary fee.
- Testing new strategies for maintaining the USTC peg and providing incentives for USTC holders and stakers. This includes reviewing the Oracle module funding and exploring USTC staking options.
Passing the proposal would mean that the community agrees that the L1 Team should use the Q1 compute budget for the test environment. If this happens, the team will mostly be focused on the USTC re-peg development in Q3. However, such focus will be dependent on community support and feedback.
LBA emphasized that the team will not proceed with the USTC test environment until they have implemented the Terra Classic upgrade to v2.1.0, which is meant to bring parity with the Luna 2.0 and the Cosmos blockchains. The L1 team successfully upgraded the network to v2.0.1 on May 17. Subsequently, the v2.1.0 upgrade is scheduled for June 14.
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