Vitalik Buterin: ETH founder says TerraUSD (UST) bailout should target small investors

By Raffaele Redi

Buterin supported the idea of a Twitter user to compensate small investors first

Ethereum founder Vitalik Buterin                                 
The founder of Ethereum has come out in strong support of returning money to all small investors in TerraUSD (UST) – Photo: Shutterstock

The recovery plan for lost funds following the collapse of the Terra project should prioritise holders of small amounts, according to Ethereum co-founder Vitalik Buterin.

His remarks came in support of comments by Twitter user PersianCapital to compensate small investors first.

“Strongly support this,” tweeted Buterin. “Coordinated sympathy and relief for the average UST smallholder who got told something dumb about ‘20% interest rates on the US dollar’ by an influencer, personal responsibility and SFYL for the wealthy.” he said.

Persian Capital’s analysis

As part of his analysis, Persian Capital focused on the wallets connected to the Anchor Protocal, Terra’s lending and borrowing protocol. Returning $0.30 for each UST invested to every wallet “would disproportionately flow to rich whales who were holding most of the UST at the time of the depeg”, explained Persian Capital.

“There are 256,000 Anchor wallets. The top 1,000 Anchor wallets own 82% of all UST,” Persian Capital tweeted, adding that “poorest” top 1,000 wallet held 955,000 UST. 

The alternative would be to focus on accounts held by people “who had a couple thousand or more of UST deposited in Anchor”. Persian Capital said: “If Terra just focused on the ‘poorest’ 99.6% of wallets, then they could make this gigantic group 100% whole.”

Do Kwon’s initial plan

Terra blockchain resumed block production on 13 May, shortly after which Do Kwon proposed to the community a refund plan, claiming that the community must be preserved.

“I’m sure our community will form consensus around the best path forward for itself, and find a way to rise again,” said Kwon.

His latest proposal is aimed at minting new Luna and distributing them among Luna stakers, UST holders, marginal Luna holders and ecosystem developers.

As of 12:00 BST (UTC +1), TerraUSD (UST) – which has remained depegged from the US dollar since 9 May 2022 – is currently trading at $0.1277, down 36.8% over the past 24 hours, according to CoinMarketCap. The UST market cap was at $1.4bn while its trading volume was $380m, 3% higher over the previous 24 hours.

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