Why Terra Collapsed and Whether an Algo Stablecoin Can Ever Succeed Unchained

Nic Carter, general partner at Castle Island Venture, Eric Wall, former Chief Investment Officer of Arcane Assets, and Erik Voorhees, founder of ShapeShift, discuss what happened with the TerraUSD (UST) and LUNA fiasco, Do Kwon’s responsibility, the impact on the crypto ecosystem, and much more. Show highlights: 
how Erik used to feel that algo stablecoins were impossible and why he changed his mind
why Eric considers that the demand for UST was tied to a sh*tcoin
why Nic didn’t think LUNA would work
how a stablecoin could theoretically be decentralized
whether Nic, Eric, and Erik think this was a deliberate attack
why they think whether or not there was a deliberate attack is not even relevant
how the de-peg started with a liquidity issue on Curve
why Nic thinks that Terra’s biggest mistake was the 19.5% APY on Anchor
whether pursuing a decentralized stablecoin is a worthy goal
what aspects of UST were decentralized, according to Erik
whether algo stablecoins are dead or whether in the future, death spirals of algo stablecoins can be avoided
why Erik believes that everything in the crypto space is an experiment, even BTC
what it says that the VCs behind Terra knew were so reputable
why Do Kwon's arrogance and inexperience might have caused this chaos
whether Terra can be rebuilt
whether this collapse imposes risks on other blockchains and other assets
why the Luna Foundation Guard’s purchase of Bitcoin might have made the UST collapse even worse
what Erik thinks about the global financial system and the US dollar
how this event could trigger more regulation in the crypto space and why it might hurt the entire ecosystem
how regulators might use the Terra case to impose CBDCs.
 
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Episode Links
 
Erik Vorhees 
Twitter: https://twitter.com/ErikVoorhees

 
Eric Wall
Twitter: https://twitter.com/ercwl

 
Nic Carter
Twitter: https://twitter.com/nic__carter

 
Previous Unchained Coverage of Terra
Do Kwon on backing UST with BTC
​​https://unchainedpodcast.com/do-kwon-is-backing-ust-with-bitcoin-and-heres-what-else-he-is-building/


Kevin Zhou on the risk of UST’s death spiral

https://unchainedpodcast.com/heres-why-usdn-de-pegged-from-the-dollar-and-why-ust-might-too/ 

Jon Wu on how Terra got de-pegged:
https://unchainedpodcast.com/did-someone-deliberately-attack-terra-luna-to-kick-off-a-death-spiral/

Terra
Twitter: https://twitter.com/terra_money 
UST Mechanics: https://angelprotocol.medium.com/how-does-ust-work-ec7b2f6e2c2c

Luna Foundation Guard: https://lfg.org/team/

UST Bank Run: https://www.wsj.com/articles/crash-of-terrausd-shakes-crypto-there-was-a-run-on-the-bank-11652371839

Speculation of a deliberate attack: https://onchainwizard.substack.com/p/how-to-make-800m-in-crypto-soros?s=r

Do Kwon’s Proposed Terra’s Revival: https://www.coindesk.com/tech/2022/05/13/do-kwon-proposes-restart-of-terra-blockchain-as-ust-luna-plummet/

Terra Blockchain Halted: https://www.coindesk.com/business/2022/05/12/luna-issuer-terra-halts-blockchain-after-week-of-losses/

Upcoming Regulation
https://www.protocol.com/bulletins/terra-stablecoin-loses-peg
https://www.theblockcrypto.com/linked/146583/yellen-says-the-stablecoin-market-is-still-too-small-to-pose-systemic-risk

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