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Do Kwon’s proposal for a Terra blockchain ‘rebirth’ just passed by 65%. Here’s what that means, and what happens next

May 25, 2022, 11:34 AM UTC

A vote to create a new Terra blockchain passed early Wednesday morning by a wide margin after the recent collapse of the chain’s signature cryptocurrencies, Luna and the stablecoin UST.

The vote was approved by an overwhelming margin of 65.5% yes to 13.2% no with veto, with 200,403,090 votes in favor and 40,374,458 votes against. A significant percentage of votes, 20.98% or 64,192,319 votes were to abstain. 

The original proposal suggested a “hard fork” that would split the blockchain in two, but the company later clarified that was not the case. The result opens the door to restarting the Terra blockchain, which hosts the two nearly worthless cryptocurrencies after a “de-peg” event of UST two weeks ago led to a broad selloff of the token that brought UST down to cents on the dollar and its sister cryptocurrency Luna down 97% in 24 hours. Creating a new blockchain would let applications that were hosted on the old Terra blockchain migrate to the new one instead of having to rework their projects.

As part of the plan, millions of Luna tokens will be distributed to supporters with the hopes that they will be worth something once people adopt the new blockchain. 

The vote was open to Luna token holders; one Luna cryptocurrency was equal to one vote. Though it’s not clear what will happen now that the proposal for a new blockchain has been approved, a yes vote is the only way that many holders of UST and Luna have a chance to recoup any of their losses. A no vote would have effectively kept those currencies worthless.

The vote about whether or not to create a new Terra blockchain, which was first proposed by Terraform Labs CEO Do Kwon on May 18, would among other things ditch the stablecoin UST and solely use UST’s sister cryptocurrency, Luna, for applications and projects based on the new blockchain. 

As part of the proposal, the old blockchain, renamed Terra Classic, would still technically exist and host the defunct UST. But the applications built on the old blockchain, along with the people and organizations validating the transactions, would likely move to the new blockchain.  

The new blockchain would be created on May 27 for any future Terra blockchain–based applications and projects. 

“We’re inspired to see the Terra community’s energy and enthusiasm for our ecosystem revival plan. With hundreds of developers working on everything from DeFi to fungible labor markets, state-of-the-art infrastructure, and community experience, this ecosystem was important to preserve, and today we have done that together,” a Terraform Labs spokesperson said in a statement to Fortune.

When he first made the proposal to start Terra anew, Do Kwon said in a tweet that he had broad support, pointing to a list of 15 Terra “builders” who created applications on the Terra blockchain and who he said were in his corner.

Still, before the official vote, 92% of voters in an online poll of 6,220 on May 16 said they would vote no. This was before Kwon’s proposal was officially live and before he made changes to the original proposal. 

Kwon faced significant controversy after he amended the proposal on May 20 after many had already voted for the original. The amendment changed the number of tokens that would be distributed to existing Luna token holders and investors that bought Luna after its collapse. Many complained that the change was unfair to those that had already voted and were not constantly checking the proposal for changes.

After Kwon amended the original proposal, Figment, which validated transactions on the Terra blockchain and has 1.5% voting power because of the Luna tokens it holds, pointed to Kwon amending the proposal as a reason for it to vote no.

“A proposal should not be a “living document” when it is actively being voted on. We believe this is bad governance and goes against basic principles,” said Figment in a blog post explaining its no vote.

Update, May 25, 2022: This article has been updated with a comment from Terraform Labs.

May 25, 2022: The language in this story has been updated to clarify that the vote was for creating a new blockchain.

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