The Terra governance system has voted in favour of a proposal to burn all Terra USD (UST) tokens stored in the project’s community pool and UST deployed for past liquidity incentives on Ethereum.
In view of this proposal, more than 1.3 billion UST, or nearly 11% of the current 11.2 billion UST supply will be burnt. 99.3% of the total cast votes were in favour of the proposal.
After the vote, Terraform Labs which is Terra’s core development firm, will proceed to execute the burn.
The burning process will take place over two phases.
In the first phase, about 1 billion UST will be sent from Terra’s community pool to a burn module where it will be permanently removed from the supply.
The Terra governance forum explains that after the first phase, the team will manually bridge back 370 million UST to Terra from the Ethereum blockchain to destroy them.
Recently, the dollar-backed stablecoin UST dropped from $1 to $0.04 cents and then showed a sign of slight recovery to $0.07 where it trades now. This represents a 93% drop from its value prior to the fall from dollar parity.
The affirmation of the UST burn followed the approval of Terraform’s revival plan to re-launch the Terra blockchain and create LUNA 2.0 tokens.
After the relaunched chain goes live on Friday, the new LUNA 2.0 tokens will be airdropped to owners of Terra-based assets. Note that the new Terra blockchain will stay without the UST tokens, and their use will be limited to the original blockchain.