A little bit of chit-chat
While the Terra spiral unfolded, the Tendermint consensus was going through its most significant test. A total of over 2.5 million transactions went through the Terra chain during the first three days of the events, peaking at 1 million on May 12th. Although there was no downtime due to technical malfunctioning, around 30% of the transactions failed on the chain level. Transaction fees remained stable, and finalisation times stayed within a decent range while some users reported a waiting time between 3 to 5 minutes.
Osmosis Response to UST 🧪
The fall of the Terra blockchain, home of UST and Luna tokens, sent shockwaves across the whole blockchain space and especially within the Cosmos ecosystem. Although there was neither consensus nor systemic risk for the Cosmos Hub, Osmosis or any other Tendermint-based chain, there was the risk of an economic attack by a potential hijacker of the Terra chain governance that could compromise the $66 million in the OSMO/UST liquidity pool.
The situation prompted the Osmosis community to move forward with five unprecedented emergency propositions. Proposition 227 called for removing all the incentives from Terra assets liquidity pools. The measure comes as these pools were receiving disproportionate rewards due to the high inflationary pressure on LUNA and the result of massive unbondings. The reason behind a total switch of incentives from Terra assets to other pools lies in technical settings within Osmosis.
Moreover, Proposition 226 asked for an emergency measure to alleviate the impermanent losses resulting from the UST's unseen depeg. This proposition allowed liquidity providers to exit the pools to "one-half of their remaining liquidity tokens in the event of an asset in the pair going to zero." Although this measure is undoubtedly a relief for liquidity providers on UST pools, it raised some concerns about the precedent it is creating, and the actions community members could ask for in future crashes.
To complete these steps in the fastest manner possible, Proposition 228 called for an emergency v8 upgrade in the shape of a hard fork.
A refuge for Terra builders 🤝
After Terra's collapse, the community started a debate on how to support the Terra developers, many of whom are skilled in building on CosmWasm. For example, Jack Zampolin called all Terra builders to reach out to their peers in the Cosmos to get started on Juno.
Other community members uploaded a Commonwealth proposal asking to create a fund for projects coming from Terra to Juno, which the Community Pool will fund. According to the proposition, the Juno Community Pool and Developer Fund will provide over $78 million to Terra developers who want to switch over to Juno and need financial support needed to continue their endeavours.
Moreover, to avoid perpetuating a dependency on UST as a stablecoin, RAW DAO passed a proposition to bring Axelar to the Juno ecosystem and, by extension, Ethereum-based stablecoins. Proposition #2 was based on the similarities between JunoSwap and Osmosis, intending to use the methodical process deployed by Osmosis to choose their bridge provider as a reference to speed up the selection process on Juno.
A stablecoin re-born ⛅
Once upon a time, the Agoric team was building a stablecoin under the ticker RUN. Now, things have changed, and it will be called IST, which stands for Inter Stable Token. The decentralised will be a fully-collateralised stablecoin backed by ATOM and, possibly, other interchain assets, making it similar to DAI's multi-asset collateralisation
According to Zaki Manian, one of the builders behind IST, the stablecoin will allow the DeFi ecosystem within Cosmos to reach the next level. By becoming an IBC native stablecoin, all protocols can use it without bridging external assets, which may entitle some risks.
In Zaki's words during a recent interview, using ATOM as collateral is the only option moving forward for plenty of reasons, including high decentralisation and liquidity. The Agoric team will announce further developments on IST around June.
Airdrops List 💦
Although there are no relevant airdrops, Terra's proposal to compensate UST and LUNA holders would eventually act as one. If Terra does its fork, creating a new chain, holders that suffered the fall will be compensated as follows:
40% would go to LUNA holders before the depegging event.
10% to LUNA holders "at the final moment of the chain halt."
Another 40% of the proposed token would go pro-rata to holders of the UST stablecoin "at the time of the new network upgrade."
The final 10% would go to a Community Pool to fund future development.
Wrap Up
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