Terra debacle nearly kill crypto: What exactly makes a stablecoin usable?
The past week has been a dark period in the history of crypto, with the total market capitalization of this industry dipping as low as $1.2 trillion for the first time since July 2021. ![]()
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The turmoil, in large part, has been due to the real-time disintegration of $Terra(LUNA.CC$.
Last week, Terra has officially stopped block production as the blockchain's native token hit a low of $0.0003, near zero. ![]()
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![Terra hits a low of $0.0003, Source: moomoo](https://ussnsimg.moomoo.com/357064610463913404.png/bigmoo)
![Terra 'officially' halts blockchain as LUNA hits zero](https://ussnsimg.moomoo.com/3783330306219129362.png/bigmoo)
In a tumble starting on May 9, Terraform Labs' TerraUSD — a token that primarily uses algorithms, rather than collateral, to adjust its supply and maintain a 1-to-1 peg with the US dollar — and its digital coin counterpart Luna lost almost all their value, while activity on the underlying Terra blockchain was twice suspended. A month after reaching a record of $119, the price of Luna now trades at near zero, while UST is stuck around 20 cents. ![]()
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The downfall of Terra calls into question the real-world utility as well as the long-term viability of algorithmic stablecoins. So what makes a stablecoin usable as the crypto market expands? ![]()
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The most important thing is that it holds its peg because then that single unit of account begins to be unreliable and unusable."
—— Sang Lee, co-founder of crypto financial service provider VegaX Holdings
—— Sang Lee, co-founder of crypto financial service provider VegaX Holdings
Lee believes that for stablecoins to be truly usable, people have to trust them. ![]()
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This creates a dilemma because, he said, "you can only use a currency if you trust it, but you trust it because other people use it." In his view, that dilemma can be nipped in the bud by ensuring there is a broad use case before building because the "use case is infinitely more important than collateral."
After two days of silence, the Terra founder Do Kwon has issued a new governance proposal to keep the community alive and compensate token holders. ![]()
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The Terra community must reconstitute the chain to preserve the community and the developer ecosystem."
—— Kwon said in a Friday post on Terra's research forum
—— Kwon said in a Friday post on Terra's research forum
Kwon proposed that validators should reset network ownership to 1 billion tokens distributed among LUNA and UST holders as well as a community pool to fund future development.
The LUNA situation will, unfortunately, leave a bad taste in everyone's mouth as this has caused a lot of great altcoins to lose tremendous value. However, the event may result in the survival of only the best projects, with most sketchy platforms losing investor interest in a big way. ![]()
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Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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Revelation 6 : With collateral you can take your time and build trust, but with only trust, the wind could blow in the opposite direction and your though. Ask Luna/Terra investors how that trust thing is working for them. Yeah that’s right, it’s not.
PassiveIncome0723 : This is part of early invention and adoption process.
PlutoMoo102685100 : You invested? @CryptoRuby
Merlion : buying btc and eth
Dons hobby : In the end XRP will be the ONE that ends up #3 behind Bitcoin and Ethereum, I believe
Mr Trecherous Dons hobby: Shiba Inu![undefined undefined](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36)
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Dons hobby : I am sorry I forgot Shib #4
Mr Trecherous Dons hobby:
搞经济 抄底 加仓 : is okay. drop dead then just create another one. no big deal
Rocket7787 : k
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