Ethereum founder Vitalik Buterin says he supports a suggestion on how to reimburse holders of TerraUSD (UST) following the massive collapse of the Terra ecosystem last week.
Originally put forth by a Twitter account named PersianCapital, the suggestion involves prioritizing the smallest holders in order to make them 100% whole after losing their funds to Anchor, Terra’s lending and borrowing protocol.
[adinserter block="1"]“One way would be to return, say, $0.30 on each UST invested to every wallet.
But this way, Terra’s funds would disproportionately flow to rich whales who were holding most of the UST at the time of the depeg. And you’d only be making everyone just 30% whole. In reality, most people would still feel bitter. So let’s explore the other way.
The second way is to prioritize smaller wallets. People who had a couple thousand or more of UST deposited in Anchor. If Terra just focused on the ‘poorest’ 99.6% of wallets, then they could make this gigantic group 100% whole.”
PersianCapital says that the benefit of prioritizing the smaller wallets would be that more people would be 100% reimbursed for their losses, which he argues is “fairer” and would improve community sentiment. He also says that it would be easier to manage the remaining group of wealthy whales after dealing with retail investors.
Buterin says precedents for these types of recovery plans already exist, including standards from the Federal Deposit Insurance Corporation (FDIC), which has a cap on the amount an entity can claim.
“Strongly support this. Coordinated sympathy and relief for the average UST smallholder who got told something dumb about ‘20% interest rates on the US dollar’ by an influencer, personal responsibility and SFYL (sorry for your loss) for the wealthy.
The obvious precedent is FDIC insurance (up to $250,000 per person). An interesting unrelated one is Singapore employment law. Stronger regulation for low-earning employees, and a more figure-it-out-yourself approach for the wealthier.
In my opinion, things like this are good hybrid formulas.”
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