Terra governance approved a new chain without UST

Terra governance approved Proposal 1623 on May 25, 2022, authorizing the creation of a new blockchain without the algorithmic stablecoin TerraUSD, or UST. The existing network would continue under the Terra Classic name, with its token renamed Luna Classic, while the new chain would inherit the Terra name and use a newly distributed LUNA token.

The decision was the ecosystem’s formal response to the collapse of the mechanism linking UST and LUNA. A contemporaneous Reuters dispatch reported that both instruments had lost nearly all their value after UST slipped below its intended one-dollar price earlier in May. Reuters did not provide a consolidated venue-by-venue return window in that dispatch, so that description should not be treated as a precise performance calculation.

What the vote authorized

Terra’s proposal record described a new network rather than a software upgrade that would carry the old chain’s complete state forward. The new chain would omit the protocol’s oracle, treasury and market modules and would not support Terra’s native algorithmic stablecoins. The existing chain and its assets would remain, but under the Terra Classic, LUNC and USTC names.

The Block reported on May 25, citing Terra’s Station governance interface, that 65.5% of voting power supported the proposal. That percentage measured token-weighted governance power at the close of the vote, not the share of individual wallets or people supporting the plan. Abstentions and opposing votes made up the balance.

That distinction mattered because the vote established what participating governance power authorized; it did not demonstrate unanimous agreement among depositors, tokenholders, developers or exchange customers affected by the collapse. The proposal’s own forum discussion contained substantial objections concerning the new chain, allocation rules and whether resources should instead be used to restore UST holders.

A redistribution, not restoration of the peg

Proposal 1623 set an initial new-chain supply of 1 billion LUNA. The plan allocated 30% to a community pool, 35% to pre-collapse LUNA holders, 10% to pre-collapse holders of aUST—the Anchor protocol representation of deposited UST—10% to post-collapse LUNA holders and 15% to post-collapse UST holders.

Those percentages describe shares of the new token supply, not repayment rates in dollars. The market value of the distributions was unknowable on May 25 because the new network had not launched and its token had no established trading history. Much of the allocation was also subject to lockups and vesting, limiting how much could become liquid at genesis.

The proposal defined its earlier snapshot at Terra block 7,544,910 on May 7, 2022, at 22:59:37 UTC+08:00. It scheduled a second snapshot for May 27. Terra’s record warned that some bridged assets, protocol positions and multisignature holdings might not be captured automatically, leaving implementation risk for users and exchanges.

Why the decision mattered

The vote separated Terra’s remaining developer and validator ecosystem from the failed stablecoin design that had been central to the network. It also converted an insolvency crisis into a contested allocation exercise: holders would receive stakes in a new protocol rather than a restoration of UST’s one-dollar target.

As of May 25, the proposal was authorization—not proof that the new blockchain would launch successfully, attract applications or give the distributed LUNA any particular value. Terra’s schedule targeted May 27 for genesis and network launch, while exchange support and final balances still depended on technical coordination.

Later context

Terra’s official documentation records that the phoenix-1 mainnet launched on May 27, 2022. That subsequent launch confirms implementation of the May 25 decision but was not yet an accomplished fact when the governance vote closed.