Force Insights｜How Does LUNA Emerge From the Crisis?
Currently, the demise of LUNA has prompted people to exclaim that stablecoin is no longer stable. The thunderbolt piercing ears makes the outsider of the circle all sigh not only, but come forward to watch in succession.
What is the recent hit about Luna?
Terra went through a death spiral last week. LUNA plunged more than 99% from $80 to almost zero, and the algorithm-based stable coin UST fell below $0.20. Briefly, the general process is the fall of Nasdaq led to the crypto market down, then LUNA fell, with a market value close to the UST; Whale selling UST triggered panic, causing the anchor, the LFG tried to maintain the stability UST with the BTC but failed. Eventually, the arbitrage mechanism caused hyperinflation in LUNA, which triggered the death spiral that made the price finally close to zero.
Behind the LUNA slump, some LUNA holders have lost $100 million in just a few hours, and someone rich overnight by short sale, making 5950%, which caused panic in the market. Media also began to make comments. Some think it is high time to pick up the bottom fishing, while others forecast LUNA’s glory days will end there forever.
“I know someone in my circle who used ropes last night because of LUNA’s crash.” Someone on the Terra’s Research Forum who got the most thumbs-up said it might not be devastating for a giant, but take a disproportionate toll on smaller investors. This highly praised post suggests that Terra should prioritize compensating Smallholders in the first place. Likewise, The CEO of Binance Exchange Chang Peng Zhao (one of the high-profile influencers of the incident) made an exception regarding commenting on other projects. Zhao claimed they were not sold the vast number of LUNA tokens they hold during the crisis. He called on Terra officials to prioritize compensating ordinary users for their losses and show that they will not be holding back on this crisis.
Vitalik Buterin, creator of Ethereum expresses critique on Terra’s Demise, posting on Twitter that “ ‘Algostable’has become a propaganda term serving to legitimize uncollateralized stables by putting them in the same bucket as collateralized stables like RAI/DAI.”
Terra’s Partners believes that the company’s failure was due to its own hubris.
The official Terra specific solution came out on May 17
“Terra founder Do Kwon proposes ‘Terra Ecosystem Revival Plan 2’: forking the Terra chain into a new chain without the algorithmic stable coin. The old chain will be called Terra Classic (token Luna Classic — LUNC), and the new chain will be called Terra (token Luna — LUNA). They will airdrop Luna across Luna Classic holders, residual UST holders, and essential app developers of Terra Classic. They will remove TFL’s wallet from the whitelist for the airdrop, making Terra a fully community-owned chain. Will incentivize Network security with token inflation. Target staking rewards of 7% p.a.”
Notice that they still negotiate with the community about the plan and the details are subject to change. The proposal will conduct after the token holder’s vote to approve it on May 18.
“Forking does not give the new fork any value,” Zhao stated flatly. “That’s wishful thinking.”
Zhao took to Twitter to express his disappointment with Terra’s handling of the crisis, arguing that splitting the blockchain to create a second version simply doesn’t work. He openly questioned the transparency with which Ms. Kwon and Ms. Tala handled the collapse crisis at HKUST and Luna. Earlier this week, blockchain data showed that LFG did send billions of bitcoins to Mr. Zhao’s Binance and Gemini accounts last week. No one knows if those reserves were actually used to buy UST.
Yuchen Sun， the founder of TRON， posted that the algorithm stablecoin is still worthy of trust, and the development of the crypto industry will be inseparable from the algorithm stablecoin. “We just need more complex and well-planned structures. Think about leverage, growth, and risk.”
Some thoughts
Consider affordability, and always plan for the worst at any time before the investment. There is no authoritative experience for reference because one person’s opinion does not represent the general situation. No matter how much knowledge is stored, there will be factual and objective deviations and differences between complex technologies and the two eras. People need to keep alert, back to a zero-learning mentality at any time, make their choice judgments carefully, and be responsible for the consequences.
People in major believe that Luna will eventually be removed from the market, but we all know that no matter who loses in the “earthquake of the coin circle” or who accidentally enters Luna, they will not want this bright star to fall. It involves a tremendous ecosystem, and its influence on the coin circle is self-evident.
Put yourself in the shoes of the founder of Do Kwon’s position, whether they can make a comeback or not, at least they won’t give up the giant ecosystem of LUNA. Also, Its rupture and disappearance will make investors disappointed, thus affecting the credibility of the entire ecosphere, not conducive to capital flow into the blockchain world. Blockchain investment, which has a so-called “Ponzi scheme” misunderstanding, will cause more investors to panic.
However, these phenomena are normal in the dynamic fintech, just like the ups and downs of life. Alas, but stop sighing, we all hoping that Terra can finally get out of trouble.
