LUNA v. LUNC v. USTC: A Cold War Heats Up
Do Kwon's TFL and the Terra Rebels gear up for a Mexican standoff over the future of Terra Classic
At Terra Classic block 8,890,141 in Terra blockchain-time, or sometime on August 12th in IRL time, the Terra Rebels and the active validators who support them (45% of the total was the last I heard) will propose the Rebels’ Terra Version 0.5.21 Terra Classic upgrade, or “v21” as the Rebels call it. Their consensus will conflict with the legacy consensus of TFL, which has been running the network without any tech support or other sign of life for over 70 days. Validators who do not explicitly support the Rebels’ upgrade will, by default, propose the old consensus.
At that point, a Reservoir Dogs-style standoff over the governance of the Terra Classic chain will begin.
Breaking the Chain
In the Tendermint consensus process, blocks are typically produced every 6 seconds or so. Every time a block is produced, all validators on the active validator set vote on the proposed code. They must all propose identical code for the block to be added to the chain.
If a validator(s) proposes code that doesn’t match the others’, the network immediately compares all the proposed code blocks and begins a ruthless process to create a new network consensus.
If two-thirds of all staked L1 tokens (LUNC) propose identical code, that code is recognized by the network as the consensus majority. The minority, with less than 1/3 of the votes, is overridden and sent to validator jail. If the defeated minority continues proposing “erroneous” code after being sent to validator jail, their staked L1 tokens are gradually slashed to zero, they become powerless, and new validators appear to take the terminated validators’ place.
However, if the majority cannot muster a two-thirds majority and the minority is greater than one-third, the chain halts until one side racks up a two-thirds consensus.
So, once the Terra Rebels’ contrarian code is uploaded to the network, the chain will very likely halt, and a very noisy battle between the missionaries (Terra Rebels) and the mercenaries (supporters of the legacy code, who will be widely seen as TFL/Kwon stooges) over the future of Terra Classic will erupt.
There are currently 315 million staked LUNC out of 6.9 trillion (.04%). Further delegation was disabled by Kwon/TFL’s own decision. Kwon / TFL / the Luna Foundation Guard (LFG) control 221 million of those votes (70%). However, the LFG has been dormant, and Kwon publicly stated that he has “no control or any special privileges [and] the [original poster] should coordinate with validators for a network upgrade.” An LFG veto of any governance proposal would be a lethal nail in Kwon’s legal coffin.
There was a governance vote on $lunc to re-enable delegation.
It’s still not re-enabled.
What’s up with that @terra_money ?
I think TFL still has control over this.
700m+ of market cap is stranded with no governance/delegation.
— TCB (@THORmaximalist)
Jul 8, 2022
@terra_money We have no control or any special privileges - the op of the gov proposal should coordinate with validators for a network upgrade
— Do Kwon 🌕 (@stablekwon)
Jul 9, 2022
Thus, the Rebels sensibly presume that the TFL-controlled Luna Foundation Guard won’t overtly interfere in any governance change. Furthermore, an LFG veto would prove that Do Kwon is a bandit, destroy the reputations of any TFL employees involved, and spur a wave of public defections by TFL current/former employees to the Rebels and South Korean law enforcement.
Encouragingly, TFL has engaged in communications with the Terra Rebels at multiple levels; TFL employees are leaking them information to varying degrees unofficially, in addition to very measured official communications. TFL has sped up preparations for an airdrop of the LFG Wallet’s $65M of remaining off-chain assets (appx $50M AVAX, $9M BNB, $6M BTC) to USTC holders, seemingly assuming some kind of transfer of control.
Soon after Kwon’s post, Orbital Command, a validator widely seen in Kwon’s back pocket, posted an interesting analysis of claimable network assets which was very consistent with the Rebels’ own assessment of claimable network assets. Orbital Command noted that of the 9.8 billion USTC in existence, over 4 billion is controlled by community or TFL entities (i.e., claimable by the community, and ineligible for airdrop distributions). The $65M of airdropped AVAX/BNB/BTC would thus be spread across roughly ((5.8/9.8) * $370M USTC marketcap) = $220M of non-TFL-owned USTC market cap.
All of these signals amount to a growing accommodation on TFL’s part of a potential changing of the guard, which the Rebels found encouraging.
But when it comes to concrete actions, at all levels, TFL has put up an iron curtain of radio silence. Nothing happens with any governance proposals. No tech support is offered for any of the 20+ projects that have signed up to join Terra Classic. Kwon has never replied to Vegas, one of the Rebels leaders on public social media, when Vegas has directly addressed him.
@stablekwon@THORmaximalist@terra_money Close to 20 new projects recently are using or supporting Lunc , new listing in new exchange's were made with the burn already in action. If is true that you are here to support the community ,you should give the rights of that twitter acount to the community
— Vegas (@VegasMorph)
Jul 9, 2022
After 2 months of being stonewalled, the Terra Rebels have assumed the worst, and are going to go to the mat to see which consensus will prevail. (Which, by the way, was exactly what happened when TFL halted validator delegation in the first place: TFL didn’t get a 2/3 majority for the vote, and broke the chain until they peeled off enough validators to support the decision.)
The Rebels have publicized version 0.5.21’s final code, barring last-minute adjustments, for implementing Terra Classic proposals 3568 & 4095, which implement the 1.2% transaction tax and restore validator delegation rights respectively. (The Rebels do not support the burn-tax proposal, but wrote the code to implement it out of Proof-of-Stake democratic principle, since it passed governance with 90% of the vote.)
Their code comes with several other precautionary provisos:
it restricts delegation to the active validator set only for a period of 60 days to prevent potential governance attacks.
IBC would not be re-enabled for v21.
No validator can be delegated more than 25% of all staked LUNC at any time.
The transaction tax, because of a technical parameter change requirement, would require an additional governance action in order to be implemented.
The code has passed all internal testing and third-party reviews with flying colors, and raised no substantive issues. It’s currently undergoing third-party security audit as well as independent validator code reviews.
Intense lobbying of validators, and current and former TFL employees, continues. The Rebels take comfort in a third “neutral, but increasingly anti-TFL” validator faction, which has basically signaled to TFL that unless they find something seriously wrong with the Rebels’ proposal, it’s time to hand over the car keys:
Smart Stake validator's position on Terra Classic / $LUNC :
- Smart Stake continues to be a Terra classic validator, supporting proposals based on internal assessments. See relevant tweets for details.
- Terra classic has an active community, it is not in favor of status quo
— Smart Stake (@SmartStake)
Jul 22, 2022
- if TFL is not interested in suporting/growing the network, they should either a) consider making it a community owned project and transition formally (personal tweets dont count) or b) communicate their decision
— Smart Stake (@SmartStake)
Jul 22, 2022
In the meantime, the battle for leadership of one of crypto’s largest non-Ethereum communities will come to a head in 3 weeks. The stakes are much higher than LUNC’s currently very depressed $700M market capitalization.
Staking at a Glance
Global Staking Research
Ethereum Devs confirm the Perpetual Date for The Merge
Ethereum’s transition journey from PoW to PoS journey could take up to years as it began with the launch of Beacon Chain in December 2020 and has seen several delays on the way. Ethereum network is nearing the merger phase of its crucial transition from proof-of-work (PoW) mining consensus to proof-of-stake (PoS). Ethereum (ETH) devs offered a perpetual merger date during a conference call on Thursday.
Ethereum scaling solution zkSync announces mainnet launch in 100 days
ZkSync, an Ethereum Layer 2 scaling solution, will go live on mainnet in the next three months, the project announced on Wednesday. ZK stands for zero knowledge and zkSync is a scaling technology based on zero-knowledge rollups. ZkRollups is one of the methods used by Layer 2 networks to enable faster and cheaper transactions than is possible on the Ethereum mainnet. Other solutions include optimistic rollups, sidechains, and state channels.
Ethereum Hits Five Week High as DeFi Rallies
Ether surged to its highest level in five weeks and other DeFi names finally shook off the doldrums and posted handsome gains of their own. Many top DeFi projects increased since posting a local low on July 13. Uniswap is up 33% in the last seven days, and Aave jumped 38%.
3AC borrowed and repaid more than $2 billion from Blockchain.com before outstanding debt
Three Arrows Capital (3AC) borrowed and repaid more than $2 billion from crypto services firm Blockchain.com over the span of almost four years before its bankruptcy, documents seen by The Block show.
Polygon is helping to bring the Ethereum Virtual Machine to ZK-Rollups
Polygon has announced a zero-knowledge (ZK) scaling solution called zkEVM that is compatible with the Ethereum Virtual Machine. Polygon's zkEVM is still in a testnet phase and will hit mainnet by the end of 2022.
THORChain hits kill switch to retire Rune tokens on Ethereum and BNB Chain
THORChain, a cross-chain decentralized exchange, has begun the process to phase out the use of rune tokens issued on Ethereum and BNB Chain. THORChain is its own blockchain that allows users to swap assets across seven blockchains.
Aave Balancer Token Swap
The Aave DAO is to perform a token swap with Balancer DAO. The Aave DAO is to acquire 200,000 BAL tokens for 16907.28 AAVE tokens based on a 90 day moving average exchange rate of 1 AAVE for 11.8292250604 BAL tokens. Upon completion of the transaction the BAL tokens will be received into the mainnet Reserve Factor (RF).
NEAR partners with BitGo as it enters world of institutional investments
Digital asset company BitGo will support the NEAR Foundation protocol and its assets with qualified custody services, the company said in a statement on Tuesday. Institutions holding NEAR tokens will be able to custody and stake them via hot and qualified custody wallets on BitGo. The NEAR Foundation, a Switzerland-based non-profit that oversees sustainable development on the protocol, will also custody its own treasury with BitGo, and stake part of this treasury using BitGo wallets.
Staking Providers Lido To Expand stETH To Layer 2 Networks & New Propsal to Sell 2% of all LDO tokens Lido, the largest liquid staking protocol, plans to bring its stETH token to Ethereum’s layer 2 (L2) networks. “For Ethereum stakers, this means staking with lower fees and access to a new suite of DeFi applications to amplify yields,” Lido said Monday in a blog post detailing the expansion.
Lido Finance has also started discussions on a governance proposal to sell 20 million Lido DAO (LDO) tokens and diversify its treasury into stablecoins to pay for its operational needs.
Rocket Pool to Offer Staking Services in Race to Catch Lido
In a bid to improve its capital efficiency, Rocket Pool, the second-largest liquid staking provider representing 4.3% of the sector’s capital, is cooking up a series of upgrades designed to improve capital efficiency and expand its market share, said Marceau.eth. Marceau tweeted the upgrade would enable more participants to operate minipools and significantly increase yield by allowing commissions to be charged on a greater sum of rETH.
Crypto lender Vauld owes $363 million to retail investors after halting withdrawals
Vauld, the beleaguered Asian crypto lender that abruptly halted client withdrawals this month, owes $363 million to retail investors, according to legal documents obtained by The Block. The affidavit, filed by Vauld co-founder and CEO Darshan Bathija in the High Court of Singapore on July 8 and shared with the firm's customers in an email on July 18, reveals that the crypto lender owes a total of $402 million to creditors. Of that sum, $363 million — or 90% — comes from individual retail investors' deposits.
Crypto staking firm Figment says it will support MEV on Ethereum 2.0
Crypto staking protocol Figment says it will support maximal extractable value (MEV) when Ethereum is fully up and running as a proof-of-stake network, the company announced on Tuesday.
As Stake-Fi economy grows Bifrost sees over 97k ($4.6m) KSM liquid derivatives minted
Seeing over 97,000 of KSM ($4.6m) liquid derivatives minted since the launch of Bifrost’s Staking Liquidity Protocol (SLP), Bifrost is growing exponentially, and looking to be an important cross chain liquidity staking hub within DeFi.
✅ New Verified Providers on StakingRewards.com
This week we announces two new Verified Providers: Fens & P2P Validator
Have a look at their profiles:
🔔 New Journal about Mistakes when choosing a Staking Platform
Avoid mistakes when choosing your preferred staking platform!
🔔 New Journal about Quality Crypto-Assets During this Bear Market
As the market shakes out weak hands and exposes the facades of different projects, take an objective view of the projects that remain and bunker down for the crypto winter.
🔔 New Journal from P2P Validator about Polkadot Staking Rewards
Understanding why are there missing rewards in the Polkadot ecosystem and what could be the solutions through this research article from P2P Validator.
Staking Rewards is Hiring Researchers and Engineers
We are looking for proactive, intelligent, and determined people to join our team across all functions. Positions are fully remote.
We are looking to hire 2-3 more Researchers, to join our team of 3 on a mission to become the unprecedented experts on staking data and economics. Apply here.
We are looking to hire Software Engineers with Web3 experience to develop the data aggregation pipeline for Staking Rewards. Apply here.
We are looking for a People Manager, who will own all matters HR at Staking Rewards. Apply here.
If you know anyone who would be a great fit, please ping us. We offer a generous referral bonus.