Share this article
Terra Proposes Token Burn and Increase in Pool Size to Stop UST Dilution
Terra believes decreasing the amount of UST in circulation while increasing the amount of available LUNA is the easiest way to return the UST to its dollar peg.
By Sam Reynolds
Updated May 11, 2023, 5:23 p.m. Published May 12, 2022, 9:45 a.m.
Terra, the protocol behind the UST algorithmic stablecoin that has lost its dollar peg and is putting pressure on the price of the LUNA token, plans to burn UST and increase the available pool of LUNA.
“The primary obstacle is expelling the bad debt from UST circulation at a clip fast enough for the system to restore the health of on-chain spreads,” said Terra in a tweet.
STORY CONTINUES BELOW
Don't miss another story.Subscribe to the Crypto Daybook Americas Newsletter today. See all newsletters
Algorithmic stablecoins like UST are supposed to be automatically pegged to the price of another currency, such as the U.S. dollar. As explained here, traders can swap LUNA for UST at $1 regardless of the market price because the algorithms in the back end will manage the supply of LUNA, creating enough scarcity to justify the $1.
A token burn refers to taking crypto out of circulation on the blockchain. It can be thought of as a deflationary event, because it would increase the value of the remaining blockchain. For token holders it would be a similar event to a share buyback.
In a proposal put forward to token holders, Terra said that it wants to burn the nearly 1 billion UST (roughly US$690 million) in the community pool while increasing the Base Pool of LUNA available to 100 million, which in turn increases minting capacity to over $1 billion. This will help expedite the outflows of UST from the system, thus pushing it back closer to its peg while pushing down the price of LUNA.
“Currently, the burning of UST is too slow to keep pace with the demand for excess UST to exit the system, which is hindered by the BasePool size,” reads the proposal. “Eliminating a significant chunk of the excess UST supply at once will alleviate much of the peg pressure on UST.”
Some comments on the proposal asked if this happened because of a bug in LUNA’s coding, or if it was also a product of a broader market downturn driven by the decline in bitcoin’s (BTC) price.
Validators of the network are able to vote for this proposal. According to a vote tracker, the Yes side has received 50.47% of the vote while the abstain side has 49.1%; 87.8% of eligible voters have already cast a ballot, and the pass threshold is 50%.
More For You
What to know:
- As of October 2025, GoPlus has generated $4.7M in total revenue across its product lines. The GoPlus App is the primary revenue driver, contributing $2.5M (approx. 53%), followed by the SafeToken Protocol at $1.7M.
- GoPlus Intelligence's Token Security API averaged 717 million monthly calls year-to-date in 2025 , with a peak of nearly 1 billion calls in February 2025. Total blockchain-level requests, including transaction simulations, averaged an additional 350 million per month.
- Since its January 2025 launch , the $GPS token has registered over $5B in total spot volume and $10B in derivatives volume in 2025. Monthly spot volume peaked in March 2025 at over $1.1B , while derivatives volume peaked the same month at over $4B.
More For You
Ethereum’s P2P Layer Is Improving Just as Institutional ETH Buys Pick Up
Early PeerDAS performance is proof that the Ethereum Foundation can now ship complex networking improvements at scale.
What to know:
- Ethereum co-founder Vitalik Buterin said that the network is addressing its lack of peer-to-peer networking expertise, highlighting the progress of PeerDAS.
- PeerDAS, a prototype for Data Availability Sampling, is crucial for Ethereum's scalability and decentralization through sharding.
- BitMine Immersion Technologies has significantly increased its Ethereum holdings, viewing it as a strategic investment in the network's future scaling capabilities.
Top Stories
