Terra Reboot Offers Underwhelming Airdrop for Holders of Failed Tokens

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Martin Young

Wed, May 25, 2022, 10:04 PM 4 min read

Hype is building in the crypto world over the launch of Terra 2 on Thursday, May 26, or Friday, depending on the time zone where the genesis block occurs. Instead of a hard fork as previously expected, there will be a new genesis blockchain starting from scratch without the stablecoin. The previous token will be renamed Luna Classic (LUNC), and the new Luna will be airdropped to holders of the failed token and its algorithmic stablecoin.

Earlier this month, the entire Terra ecosystem fell apart when the stablecoin lost its dollar peg and trillions of LUNA tokens, which served as its collateral backing, were minted, consequently crashing its value to zero.

The Terra community has voted on starting again with a new chain and new token. However, there are a few catches to what holders of the worthless two tokens will receive.

South Korean authorities have already started taking action against the Terraform Labs CEO and exchanges holding funds purportedly linked to the Luna Foundation Guard.

Four Groups for Luna Airdrop

Four groups will be eligible to receive new Luna tokens in the airdrop, those that held LUNA and UST before what the project calls “the attack” and those that bought them after. Two snapshots were taken, one on May 7 to determine the first group and one on genesis day on May 27.

Major crypto exchanges are already announcing support for the new network after freezing trading and locking users out of their holdings of the previous two tokens.

There will be a billion new Luna tokens and the genesis of the Terra 2 chain will unlock 12% of the total supply, or 111,811,200 of them for distribution.

The distribution breakdown is as follows: 30% will go into a community pool, “pre-attack” LUNA holders will get 35%, pre-attack UST holders get 10%, post-attack LUNA holders get 10%, and post-attack UST holders get 15%.

On May 25, Terra validator ‘Orbital Command’ explained the ratios of tokens airdropped to those held, and they are underwhelming, to say the least. The pre-attack LUNA holder group will get an airdrop very close to 1:1. However, those that bought the token after the collapse will get just 1:0.000015.

Those holding the UST stablecoin before it collapsed well get just 1:0.033 and those buying in after getting 1:0.013 new Luna per UST. For example, someone holding 1,000 UST on genesis day will get airdropped 13 new LUNA tokens.

Not So Fast …

However, there are more catches since only 30% will be airdropped this week and the rest vested linearly over two years, according to the validator. Furthermore, the tokens will arrive in a “bonded state,” which means there is a 21-day delay period before they can be transferred. This unbonding delay led to millions of dollars in losses when the system collapsed as stakers could not withdraw their tokens immediately.

One Terra researcher predicted that “LUNA price will probably be $5-10 once price settles after a month (see UST futures market) and LUNA supply will be low for first six months.”

Ardent supporters of the network are hyping up the re-launch, but the rest are just wondering if it will be just more of the same.

LUNA prices have jumped about 18% over the past week, but they’re still pretty much worthless at $0.00016.

This article was originally posted on FX Empire