Terra Luna: Greed, scandals, blood and loss. Full history of project.
Have you ever heard of Terra Luna? If yes, then you know how much has happened in the last few months. But let's go in order.
1 Part. What is Luna , Ust and how does it work? Terra's story begins in January 2018, when bitcoin skyrocketed to the front pages of the most prestigious financial publications, and cryptocurrency was the hottest topic among businesses. Daniel Shin, a Korean entrepreneur and investor, did not stay away from this hype, which fate brought together with Do Kwon, a novice programmer and startupper. He had a lot of enthusiasm for creating a new blockchain with all the new technologies - this is Proof of Stake, Decentralized Finance and Eco-System. But why do we need UST? It's simple, neither sellers nor buyers need a cryptocurrency in the usual sense, they need an electronic dollar that will never fall in price. And Terra had this dollar - UST.
UST is an algorithmic stablecoin that is part of the trendy concept of Decentralized Finance, attracting many investors and companies with a surplus of money.
2 Part. So how does work Terra blockchain?
The two most important things in Terra Blockchain are UST and the Luna, which is the main one in this blockchain, with the help of it you can vote on changes in the blockchain and this is the coin that can grow by tens of percent per day, and most importantly, this is the promise to pay a lot of money to the crypto investors.
3 Part. The main problem of Eco-System.
For example, the price of UST has risen by $1.05, while Luna is worth the same $10. You change Luna to UST and sell UST to USD. Profit: 50 cents or 5%. The value of all outstanding UST is backed by nothing but the market value of Luna. The only way to keep UST stable is by burning Luna , but it burns out of circulation forever, and there are no inflows of new tokens.
Partners wanted money, but how to get it? Doing this was enough for them to get people to enter the stablecoin in large volumes, but how to attract them? It's simple - 20 percent per annum. (Where did you even see such percentages?)
4 Part. Problems with this scheme. Let's remove the curtain and we'll see two problems:
Terra can print limitlessly UST.
UST = 1$.
5 Part. What are they doing next? What do they do next? They create a project called Anchor and present it as a crypto bank. Interest to depositors is taken from interest by the borrower, who will borrow UST, and if the bank takes part of the interest for itself, then Anchor will distribute to all depositors to the penny. But Anchor pays interest not in dollars, but in UST, and since the Anchor project is owned by Terra, they can print as much UST as they want. But there was a small problem here, there were many people who wanted to invest at 20%, but there were no borrowers, and in order to create the illusion that they were borrowers, they came up with the idea that they would make additional payments to borrowers in Anchor (ANC)
5 Part. July 2021. UST is one of the top five stablecoins. By the end of 2021, with a capitalization of $10 billion, it overtakes DAI and enters the 4th place of stablecoins, becoming the #1 decentralized stablecoin. In eight and a half months from the launch of Anchor, the value of the token increased by 4.5 times and the Anchor service became the second largest crypto bank by that time, having collected deposits of $ 5 billion.
6 Part. 2022. Terra was already having to replenish its stock of 450 million printed UST, by the end of April Anchor was giving away 6 million UST per day. On March 24, the creators come to the vote, to the fact that they need to lower the rate on deposits. They decided that they would reduce rates by 1.5% per month, and therefore the rate was reduced from 19.5% by 18%. Meanwhile, Do Kwon is trying to gain a foothold in the crypto space by acquiring significant control over the Curve platform. Kwon wants to organize an attack on his competitor - DAI. The main DAI pool is 3Pool, where USDC and USDT are also located, he agreed with them that they will create their own pool - 4Pool, where DAI will be overboard.
7 Part. The beginning of the inevitable. On the late evening of May 7, 2022, Terra is taking 37% ($150 million UST) from his pool, making him less capable of large sum conversions. Five minutes after the withdrawal of UST, a person sells 84 million UST. Due to the Sale of 84 million UST, the balance instantly drops, the stablecoin rate unlinks from the dollar and falls below one. Everyone begins and everyone starts selling UST so as not to lose money, and after a while, Terra still withdraws 150 million UST from the pool.
8. Part . 9 May. Pain, lose and collapse. Remember that UST is only tied to Luna? What do you think the Luna will produce if mass people start selling their UST? It is on this day that Luna's market capitalization falls and falls below the face value of all UST in circulation. Each slowdown could cost you very large losses. The maximum cost of the Luna was almost $120. 10 May. The Luna rate falls 2.6 times, and the UST stays at $0.90. 11 May. Luna depreciates another 14 times, and UST costs $0.75. By the end of May 12. The price of Luna falls 116 times below one US cent. Terra throws Terra Luna overboard. Blockchain is officially closed. By that time, holders still have 11.6 billion UST, but it becomes more and more difficult to sell cheap tokens, because the exchanges begin delisting, that is, the removal of Terra crypto coins…
Thank you all for reading this thread about Terra, which hooked me, as well as many of you. I hope you didn’t lost a lot on Luna and it will grow back like before.
