Introduction

The Terra Ecosystem Revival Plan 2 is aimed at salvaging what can be salvaged in terms of community and pivot, as Ethereum did in the past, to a "v2" or "new" Terra blockchain.

Summary of the new proposal (ver 2):

1. Create a new Terra chain without the algorithmic stablecoin. The old chain to be called Terra Classic (token Luna Classic - LUNC), and the new chain to be called Terra (token Luna - LUNA)
2. Luna to be airdropped across Luna Classic stakers, Luna Classic holders, residual UST holders, and essential app developers of Terra Classic.
3. TFL’s wallet (terra1dp0taj85ruc299rkdvzp4z5pfg6z6swaed74e6) will be removed from the whitelist for the airdrop, making Terra a fully community-owned chain
4. Allocate a large portion of the token distribution by 1) providing an emergency runway for existing 4. Terra dapp developers 2) align the interest of devs with the long term success of the ecosystem
5. Network security to be incentivized with token inflation. Target staking rewards of 7% p.a.

Wealth distribution on Luna v2

App Developers

Essential app developers committing to launch on Terra will receive:

1. Emergency allocation (0.5% of total supply): immediately after network launch to provide for runway while they build out the product. Commit to returning funds if the product has not been launched in 1 year.
2. Developer Alignment Program (1.5% of total supply): Protocol teams that were live in Terra Classic divide this allocation weighted by the last 30 day TVL from Pre-attack snapshot - 1-year cliff, 3 years vesting thereafter
3. Developer Mining Program (8% of total supply): Essential app developers earn a share of the mining program proceeds pro-rata to the amount of TVL every quarter for 4 years.

Essential app developers looking to join for emergency allocation should signal public support for the net network on Twitter and social channels.

Opinion/Evaluation: It seems that ~10% of the new LUNA token supply will go to the developers of the 'Classic' network. I feel that this is a fair allocation as, without these major players, the network will struggle to function as intended.

My fears specifically lie within the dapps that were developed to work natively with UST, i.e. Mars Protocol and Kinetic Money. These dapps will probably* need to pivot to something new to make them work. In the case of Mars I think they will stick to the Aave-type system, where you can deposit x amount of assets and from these potentially volatile assets allow users to borrow other assets. I think there may be some incentive to bring in less volatile assets at first like wormhole based USDC/USDT and DAI, but who knows how this will go ahead. For Kinetic it seems like they need to pivot to an entirely new type of dapp.

Overall Token Distribution

1. Community pool: 25%
   • Controlled by staked governance
   • 10% earmarked for developers
2. Pre-attack LUNA holders: 35%
   • All bonded / unbonding Luna, minus TFL at “Pre-attack” snapshot; staking derivatives included
   • For wallets with < 1M LUNA: 1-year cliff, 2 years vesting thereafter
   • For wallets with > 1M LUNA: 1-year cliff, 4 years vesting thereafter
3. Pre-attack aUST holders: 10%
   • 500K whale cap - covers up to 99.7% of all holders but only 26.72% of aUST
   • 15% unlocked at genesis; 85% vested over 2 years thereafter with a 6-month cliff
4. Post-attack LUNA holders: 10%
   • Staking derivatives included
   • 15% unlocked at genesis; 85% vested over 2 years thereafter with 6-month cliff
5. Post-attack UST holders: 20%
   • 15% unlocked at genesis; 85% vested over 2 years thereafter with 6-month cliff

Opinion/Evaluation: I feel like there should be a greater allocation for people that were holding the aUST, as this was the life-blood of the Terra ecosystem (Anchor). Even given than aUST had a different value than UST, I would still expect to see maybe from the 30% maybe a 12.5% to UST holders and a 17.5% to aUST holders instead of the current allocation, but that's just from my understanding how the ecosystem worked and how the Earn side of Anchor that got attacked could be compensated more fairly.

With regards to the LUNA allocation, I feel like this is a fair schedule, it also helps reduce the selling pressure on the token itself upon launch and allows development to take place before there's a major dump in the market. That said, it does not mitigate more major dumps to come as the vesting schedule gives out more tokens over time.

Summary

I am still unsure of how I feel about this whole plan. There's no amount of $ disclosed anywhere (at least that I could find), that would help with reimbursing users for their loss. All the calculations that can be done to give us a better estimate are also then much harder to compute. Yes, we could get a very general estimate on a few assumptions, but recovering even 1/4 of ~40B $ lost is infeasible as I do not think the Reserve has close to that amount, even if somehow there's enough money that will come in from other sources/people to help with restoration, I doubt it will reach anything close to 1/4th.

So in the end, what is it all worth? Well, if this plan is to be voted on and followed it does offer a non-zero return for the people that have been affected, which is something. But within those people, there are people who overinvested, put their whole life savings into the project, which need liquidity to pay off bills, e.t.c. I especially feel bad for those people as I do not think that when their initial share unlocks upon network launch will be enough (also depending upon LUNA price at the time) to allow them to recover financially.

It is though a good start and it's better than nothing. For that reason, I admire the proposal, because it is a solution, maybe not the best solution.