Terraform Labs has proposed a set of measures aimed at restoring the algorithmic stablecoin UST and the LUNA cryptocurrency.

2/ Various measures are being taken to accelerate this goal. First, the current Prop 1164 will expand the base pool size and speed up the burn rate of the UST and help dampen on-chain propagation. https://t.co/XLDkQTH4mF

— Terra (UST) 🌍 Powered by LUNA 🌕 (@terra_money) 12 May 2022

The company pointed out that the oversupply of UST is putting pressure on LUNA prices. According to the developers, their main task is to withdraw the “bad debts” in the stablecoin from circulation in a fairly short time.

One of the main measures is the activation of proposal 1164, which was previously announced by Terraform Labs president Do Kwon. The initiative includes expanding the underlying LUNA pool and increasing issuance of the cryptocurrency, which will allow the required amount of UST to be withdrawn from circulation faster.

According to CoinGecko, at the time of writing, the UST is trading around $0.47 while the LUNA is trading at $0.05. A week ago, the first was pegged to the US dollar, while the second was around $85.

Terraform Labs has proposed additional measures to stabilize the situation:

• Burning the rest of the UST project’s community pool (about 1 billion coins);
• Burn 371 million UST on the Ethereum blockchain;
• Allocate 240 million LUNA to protect against potential attacks on the network.

4/ The full Agora proposal for burning the remainder of the community pool UST, including the cross-chain UST burning offer, can be found at the link below. Voting will be published shortly. https://t.co/jALjY5T4uM

— Terra (UST) 🌍 Powered by LUNA 🌕 (@terra_money) 12 May 2022

“In total, approximately 1,388,233,195 UST will be withdrawn from circulation when these three offers are activated. That’s about 11% of the total stablecoin supply,” the developers wrote.

The company’s measures have been criticized online. In particular, some users have noticed that recommendation 1164 will only accelerate the “death spiral” of the ecosystem. The panelists also noted that any attempt to save the UST would lead to a complete devaluation of LUNA.

Prop 1164 will basically accelerate the spiral of death. Please preserve the remaining value in the ecosystem instead of wasting it.

— PacMatt ⚡️🌖 (@pacmattt) 12 May 2022

According to The Block analyst Larry Cermak, the only way out for Terraform Labs is to abandon UST and focus on mainnet development. He stressed that as the ecosystem grows, the project team must pay off the stablecoin debt.

Of course, even if they do what I say, their chances of success are probably close to zero. But it’s 100% zero right now and probably couldn’t be better for legal reasons. Also, if Terra has any reserves left, they should definitely commit to making the users whole.

— Larry Cermak (@lawmaster) 12 May 2022

“Of course, even if they do as I say, the chances of success are probably zero. But otherwise it is 100% zero and the situation cannot get better for legal reasons. Also, if Terra still has reserves, users should definitely send them to make up for their losses,” Cermak wrote.

Recall that CoinDesk journalists learned that Do Kwon was one of the anonymous co-founders of the crashed algorithmic stablecoin Basis Cash.