Source from:

• https://validator.info/terra-classic/governance/12209
• https://discourse.luncgoblins.com/t/lunc-forex-genesis-eutc-repeg/290

LUNC FOREX – Collateralized Stablecoin Module (CSM) EUTC Kickoff

Revised Proposal with Stablecoin-Based Fees + Automatic LUNC Buyback System

All development done for free; only liquidity investment required post development and will require new proposal

1. Overview

The LUNC FOREX module introduces a multi-currency, fully collateralized stablecoin system built directly on Terra Classic.

Key improvements in this version:

• Mint & redeem fees are now paid in the same stablecoin used
  → simpler for users
  → avoids friction
• These fees become secondary collateral
• Secondary collateral is used to buy back LUNC on GDEX Terraswap or Terraport whichever gives best price at the time of buy back
• Purchased LUNC is stored in a permanent protocol vault
  → This creates a continuous buyback pressure
  → Strengthens the LUNC supply over time

No matter how much EUTC is circulating, only 10% of total supply can be redeemed per day.

This prevents:

• Instant mint → redeem arbitrage loops
• Large-scale redemption runs
• A liquidity crunch in the USDC vault
• Oracle-timing exploits

Because even if someone mints 10M EUTC, they can’t redeem more than 1M/day, no matter what.

This drastically reduces the collateral risk, meaning:

 0.5% premium is now more than enough

 100.5% collateralization becomes safe & stable

 The system becomes resistant to volatility and flash pressure

This design replaces the failed algorithmic market module with a safer, collateral-backed architecture driven by user demand and DEX arbitrage.

2. Supported Fiat Stablecoins

EUTC – Euro-pegged Terra Classic Stablecoin

Collateral Options:

• EURC 1:1
• USDC 1:1 with 0.5% premium

USDC includes a premium to protect against EUR/USD fluctuations and DEX spread.

3. Minting Process

Minting with EURC (no premium):

1. User deposits EURC.
2. Contract mints EUTC 1:1.
3. Protocol fee: 1.5% taken in EURC
   → No need to buy USTC or extra tokens.
4. The EURC fees become secondary collateral.

Minting with USDC (+0.5% premium):

1. User deposits USDC.
2. Contract applies 0.5% mint premium.
3. User receives:
   \text{EUTC minted} = \text{USDC deposited} \times 0.995
4. Protocol fee: 1.5% taken in USDC
5. The USDC fees become secondary collateral.

4. Redemption Process

1. User sends EUTC back to the contract.
2. EUTC is burned.
3. User receives the same collateral they deposited (EURC or USDC).
4. Protocol fee: 1.5% taken in the same stablecoin they withdraw.

This keeps the system clean and avoids token-hopping.

5. New Mechanism: Secondary Collateral Buyback

All mint & redeem fees (in EURC or USDC) accumulate in the Forex Secondary Reserve.

The contract then performs:

Automatic LUNC Buybacks

• Secondary collateral is periodically swapped on GDEX Terraswap or Terraport whichever gives the best price at the time of buy back for LUNC.
• Purchases happen automatically through smart contract logic.
• No governance needed, no human involvement.

Permanent Vaulting

All buyback LUNC is sent to a LUNC Vault:

• LUNC is non-circulating
• Cannot be spent
• Only grows over time
• Strengthens long-term LUNC scarcity

This essentially turns the stablecoin into a permanent LUNC accumulation engine.

6. Liquidity Strategy

The community pool may seed initial liquidity for:

• EUTC/LUNC
• EUTC/USTC
• EUTC/USDC

DEX environments:

• Garuda (GDEX): 0.3% swap fee (0.2% to LPs 0.1 dex shares)
• Terraswap: 0.3% total swap fee (100% to LPs)
• Terraport 0.3% swap fees

Plus the chain earns the 0.5% tax on every native swap.

This creates:

• Arbitrage opportunities
• Peg maintenance through DEX
• Increased chain volume

7. How This Design Benefits the Chain

Fully Collateralized & Regulatory Neutral

No algorithmic expansion. All stablecoins backed 1:1 by EURC/USDC.

Stablecoin fees power LUNC accumulation

Every mint & redeem → protocol earns stablecoin → buys LUNC → vaults it forever.

Sustainable revenue without inflation

Chain revenues come from:

• onchain tax 0.5%
• Liquidity providers fees on DEX 0.2-0.3%/trade
• Protocol fees 1.5% on mint/redeem that buys back and vaults LUNC

Simple UX

Users only need the stablecoin they want to mint with.

No need to buy an extra fee token.

8. Funding Request

At the end of the proposal:

• Request for liquidity injection into the primary pools
• All coding, architecture, smart contracts, testing, and documentation remain free
• Funds only go toward strengthening peg liquidity

9. Final Clarification

This proposal is exclusively for the construction of the CSM system:

• Multi-asset collateral
• Stablecoin issuance
• Automated swaps
• LUNC buyback vault logic

It is the replacement of the old market module and establishes a safe, transparent, decentralized stablecoin framework.

Appendix:

Kill switch :

• Be multisig-controlled
• Require multiple signers (5-of-9 is common)
• Pause new redemptions temporarily
• Never block user balances or stop mints unless needed
• Automatically resume after governance vote

This protects user trust while preventing chaotic failure scenarios.

EUR/USD 1.0340 – 1.1850 Current range on W1 time frame.

USD interest rates should drop.

EUR interest rates should drop, slightly.

Current rates are 2.15% in European Union, 4.00% in USA

The EUR/USD can fluctuate up and down 1% per day easily but many days does not move at all.

We suggest portfolio rebalancing there is a 5% differential between the value of the USDC and EURC

Presented by

Nicolas Boulay , Lunc Cookie DO , Luncverse Validator, Luncdash team.

Strathcole has been tremendous help with organizing everything and will help deploy CSM after approval of proposal.

Mark Mcdonnell Forex expert guiding us on liquidity rebalancing, macroeconomic trends and risk assessment.