Source from:

• https://validator.info/terra-classic/governance/12167
• https://common.xyz/terra-luna-classic-lunc/discussion/26579-Proposal:%20Implementing%20USTC%20Staking%20for%20Utility%20and%20Supply%20Reduction%20%20

Proposal: Implementing USTC Staking for Utility and Supply Reduction (BLV Labs)

Summary

This proposal aims to introduce a staking mechanism for TerraClassicUSD (USTC) similar to the existing LUNC staking system, but without the governance module. The primary objectives are:

1. Increase direct utility for USTC by allowing holders to stake and earn rewards.
2. Reduce USTC circulating supply, which will drive price appreciation and contribute to price stability.
3. Strengthen LUNC staking by increasing USTC demand, which indirectly boosts LUNC staking rewards, creating a positive feedback loop that benefits both assets.
4. Prepare necessary tools for a future USTC repeg, ensuring price stability and reducing volatility.

Additionally, validators must run an oracle price feed for USTC to be eligible to offer staking services. This ensures a decentralized and accurate price feed for USTC, which is essential for future stability.

Technical Implementation

1. USTC Staking Module

A new USTC staking module will be created, operating similarly to LUNC staking but with key differences:

• No governance rights for stakers (unlike LUNC staking).
• Validators will be able to offer USTC staking if they run a USTC price feed oracle.
• Delegators stake USTC and earn rewards from the reward pool.
• Rewards are distributed using the same distribution curve as the Oracle Pool for LUNC, but with different funding mechanics.

2. Oracle Price Feed Requirement for Validators

To participate in USTC staking, validators must:

• Run an oracle price feed for USTC (similar to LUNC price feeds).
• This will ensure accurate pricing data for the network and enhance future repeg efforts.
• If a validator does not maintain the feed, they will have less rewards to offer for the USTC staking(similar to lunc staking).

3. Reward Distribution Pool

A new USTC reward pool will be established. The pool mechanics:

• Follow the LUNC Oracle Pool, with the same reward curve distribution model.
• Open contribution model: Anyone can send native or CW20 tokens to the pool, and they will be distributed to USTC stakers.
• This system allows flexibility—projects looking to increase token utility can send their tokens to the pool, benefiting USTC stakers,and benefiting layer 2 tokens as well.

Expected Benefits

1. USTC Utility Increase

• USTC staking gives holders a new use case, reducing sell pressure and speculation.
• Encourages long-term holding, which helps stabilize the price.

2. USTC Supply Reduction

• Staked USTC is removed from circulation, reducing total liquid supply.

• Less supply = higher price stability, making repeg efforts more viable in the future.

3. Boosting LUNC Staking and Price

• Since LUNC staking rewards include USTC, a higher USTC price increases LUNC staking APR.
• This makes LUNC staking more attractive, leading to increased LUNC demand and price appreciation.

4. Prepares the Network for USTC Repeg

• Price stability tools are essential before attempting a repeg.
• A strong staking ecosystem will create less volatility, making repeg efforts smoother.
• Encouraging validators to run a USTC price oracle ensures price accuracy, preventing manipulation risks.

Conclusion

This proposal introduces a staking mechanism for USTC, providing immediate utility while reducing supply and increasing price stability. By requiring validators to run a USTC price feed, it also lays the groundwork for a future repeg. The flexible reward pool system ensures sustainability, allowing both native and CW20 tokens to be distributed as rewards.

This is a long-term strategic move to stabilize USTC and enhance the entire Terra Classic ecosystem. We urge the community and validators to support this initiative to prepare for a successful repeg in the future.

For: Implement USTC staking, require USTC oracle price feed, establish a flexible reward pool. Against: No change, leaving USTC without direct staking utility

Noted: If this proposal passes, a technical proposal will follow, detailing schedules and work orders. Each task will be submitted separately, allowing the community to vote on individual items. If there is anything the community disagrees with, it can be removed from the work order by voting ‘No’ on that specific proposal.