The submission by Delphi Labs, the cryptocurrency research firm that helped found Mars, will “automatically close open positions” on the platform and “refund users by returning deposits to their wallet addresses.”
According to the proposal, “this will essentially shut down the protocol and clear all assets it currently holds.” Delphi said its decision has been motivated by the uncertainty surrounding the Terra ecosystem following the “unprecedented collapse of UST and the price of LUNA.”
“Terra is likely to become economically unsecure or permanently halted,” it stated, adding that “questions regarding crediting smart contracts with assets on ‘Terra 2’ and other chains remain unanswered.”
Earlier, Mars Protocol tweeted that its “compatibility with any Terra hard fork is uncertain without the presence of a reliable stablecoin.”
Mars total value locked crumbles to $2.6 million
Mars is a decentralized borrowing and lending protocol built on the Terra blockchain. It is designed to be non-custodial, algorithmic, and community-governed. A feature called ‘Red Bank’ allows for this, while another, ‘Field of Mars’, gives some whitelisted addresses access to borrow funds without collateral.
Since launch in March, Mars has been one of the most active platforms on Terra. At its peak, it hit more than $350 million in TVL. But that figure has now dropped to just $2.6 million, per data compiled by Defillama.
Thanks to UST’s demise, the stablecoin created by South Korean entrepreneur Do Kwon’s Terraform Labs, and was pegged to the U.S. dollar using a complicated supply-and-demand algorithm linked with the LUNA token.
UST tumbled to $0.07 and LUNA fell from an all-time high of $120 to $0. Amid the panic, Mars’ total sum of assets managed tanked 96% to $9.3 million in the four days to May 14, falling further to $2.6 million, as of the time of writing.
Now, Terra CEO Do Kwon has proposed a plan to split the blockchain into a new chain called “Terra 2.0”, but without the algorithmic stablecoin of the old chain. Kwon said the old chain would be called “Terra Classic”. Results of a vote on the plan are pending.
Terra ‘hardfork’ problematic for Mars, says Delphi Labs
In its proposal, Delphi Labs argued that the plan to split Terra created a range of problems for the Mars Protocol.
For example, the competing governance proposals for the future of the blockchain “could lead to a scenario where Mars would need to be maintained on multiple chains [such as] both Terra Classic and Terra 2.0,” it observed.
The company said it was “preferable that end users, not the Mars smart contracts”, hold funds in the event of an airdrop arising from the launch of new Terra chains. Delphi Labs is also concerned about the “questionable economic security” of the emerging breakaway chains on Terra.
To facilitate the shutdown, Delphi Labs “funded the Red Bank with sufficient LUNA, UST and ANC [tokens] to close all open positions without users first needing to pay off outstanding loans.”
The fate of the MARS token remains unclear. The token slipped 1.1% to $0.001 over the past 24 hours, according to CoinGecko. MARS is down over 99% from its record high of $0.25 in April.
What do you think about this subject? Write to us and tell us!
All the information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.