Terra (LUNA) Collapse Predicted 4 Years Ago; Check Out This Visionary Statement
Seasoned Ethereum (ETH) developer, investor and advisor Mariano Conti, former Head of Smart Contracts at MakerDAO, recalled a discussion on Terra (LUNA) design flaws from April 2018 — and it looks absolutely visionary.
Terra's (LUNA) 'death spiral' was predicted in 2018
Mr. Conti has taken to Twitter to share a statement by Cyrus Younessi, his colleague at MakerDAO. On April 20, 2018, Mr. Younessi slammed the architecture of Terra (LUNA) and its TerraUSD (UST) stablecoin.
I call bullshit on not realizing Luna would death spiral.— mariano.eth ✨ᕙ༼ຈل͜ຈ༽ᕗ✨ | 🦇🔊 (@nanexcool) July 22, 2022
Here's @cyounessi1 in freaking 2018 explaining concisely what could, and inevitably did, happen... pic.twitter.com/dnt5lOrjlc
In a statement cited by a blockchain veteran Linda Xie, former PM of a cryptocurrency exchange major Coinbase, Mr. Younessi bashed the idea to solely back UST with the LUNA token.
In 2018, he compared this design to MakerDAO's DAI, but if the latter were only backed by the MKR asset. This "one-asset" backing is too fragile: investors' panic would easily launch a "death spiral" mechanism when two cryptocurrencies — a stablecoin and its "basic token" — would be racing towards zero.
But LUNA would fall if investors would panic, then, Terra would continue to fall, and then they would just each keep contributing to each other's demise
He also recalled the tragedy of the first-ever algorithmically-backed stablecoin NuBits (USNBT) that collapsed in Q2, 2016; Mr. Younessi was surprised that some teams are still interested in similar designs.
Terra (LUNA) collapse was painful to entire industry
Mr. Conti also attached a statement on Three Arrows Capital's Su Zhu, one of the largest investors decimated by Terra (LUNA) collapse. Mr. Zhu allegedly "failed to realize" how fragile the LUNA/UST ecosystem is.
As previously covered by U.Today, thanks to the large-scale withdrawals from over-hyped Anchor Protocol (ANC) and subsequent panic selling, TerraUSD (UST) stablecoin lost its peg to the U.S. dollar.
The "death spiral" pushed the prices of LUNA and UST to near-zero values; dozens of cryptocurrency funds with open positions in LUNA were liquidated.
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