I don't understand.
How do you ensure you have enough Luna to maintain the exchange? If you hold enough Luna but then the price of Luna goes down, where do you get your extra Luna from? A run on your promise kills you.
How do you ensure you have enough Luna to maintain the exchange? If you hold enough Luna but then the price of Luna goes down, where do you get your extra Luna from? A run on your promise kills you.
The problem occurs when the amount of Luna that trades for $1 becomes undefined because nobody is willing to do the trade anymore.
In the long run you're right though. Eventually you run out of people who believe them and you get the events of the last few days.
The printing of luna when people sell terra should be offset by luna having been burned when the terra was printed. Ideally (when the price of luna is growing) then you print less luna at sale time than you burned earlier when the terra was printed. This decreases supply of luna, making luna worth more.