Terraform Labs founder Do Kwon on Wednesday morning announced an on-chain governance proposal even as results from a preliminary online poll on a hard fork plan found minimal backing among community members.
"Terra governance prop #1623 to rename the existing network Terra Classic, LUNA Classic ($LUNC), and rebirth a new Terra blockchain & LUNA ($LUNA) is now live," Kwon tweeted. He added that the proposal had the support of over 15 "Terra builders."
A hard fork means the splitting of a chain on which a certain protocol runs with different rules than the existing one, resulting in two separate blockchains. One chain then becomes the “main” one, even as both the blockchains continue to exist as long as there is validator and community support.
As per the proposal, the new chain would entirely cut out the failed UST product and instead focus on decentralized finance (DeFi) applications building on Terra, as reported. The current chain would continue as Terra “Classic,” while holders of LUNA on the “Classic” chain would receive a token airdrop of the new chain’s token under the plan.
The community, however, is apparently not on board. Some 92% of over 6,220 voters on a previously held online poll have voted against the change, with the most popular responses calling for “no fork.”
Votes to the off-chain, online poll can be made by anyone regardless of if they hold luna (LUNA) tokens, unlike on-chain governance polls that require voters to stake luna before casting votes. Most comments on the proposal’s discussion are negative. Some even term it “anti-community,” while others urged legal intervention.
Market observers say a lack of trust in Terra and Kwon could have skewed the online preliminary poll voting towards being overwhelmingly negative.
“The primary challenge the Terra community has against a new fork as proposed by Do Kwon is trust,” said Dmitry Mishunin, founder of DeFi security firm HashEx, in a Telegram chat. "Should the team choose to proceed with the new fork, there will be a need to increase trust.”
Anton Gulin, a regional director at crypto exchange AAX, seconded the comment: “The overall sentiment towards Luna across the crypto community is exceptionally harmful. Traders and investors suffered tremendous losses and doubt management’s actions that followed the UST unpegging.”
“Anything incoming from Luna’s team may be treated in the same way as the lack of trust prevails. It’s rather a speculative asset now than a representation of a tier 1 ecosystem. The chances of a consensus are very low,” Gulin added.
Meanwhile, some prominent fund managers say Terra’s senior team could fork the blockchain regardless of the community’s sentiment toward the project.
“It's a dilemma for Kwon and Terra’s team as they can technically override the community's consensus by either forking regardless of the decision or using their staked Luna (to prevent the network from being manipulated) to change the voting to support,” Doo Wan Nam, founder of crypto fund Stable Node, in a Telegram chat.
“This will be received very poorly by not only the Terra community but the wider crypto community. However, Do and his team might not have much choice but to do it to better reflect his vision of the Terra ecosystem,” Doo added.
Although still a proposal, if a majority of network validators and the community were to approve the plan, the new network could be launched as soon as May 27, Kwon said in tweets earlier this week.
Last week, Terra’s LUNA tokens fell 99.7% as its U.S. dollar-pegged stablecoin terraUSD (UST) lost its peg and dropped to under 10 cents, causing an outflow of funds from the Terra ecosystem and declining sentiment for the project among the crypto community.