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"LUNA, as one of the most representative projects in the algorithmic stablecoin category, is also one of the most notorious projects in the crypto world. Its history is like a flashbulb, shining brightly for a moment and then disappearing in an instant. Today's reexamination of LUNA is only intended to learn from history and discover some insights for the future.
Terra is a blockchain built on the Cosmos SDK and Tendermint consensus, originally designed to solve e-commerce payment problems through cryptocurrencies. However, traditional cryptocurrencies were too volatile to be used like fiat currencies, and centralized stablecoins like USDT had regional and centralization issues. So Terra aimed to create a rich and decentralized stablecoin ecosystem, including currencies like the Korean Won, Thai Baht, and US Dollar.
To achieve this goal, Terra needed a universal minting mechanism. Soon, on a day in April 2019, a minting method was proposed by Terra's co-founders, Do Kwon and Daniel Shin, in Terra Money's whitepaper. This method involved minting various stablecoins of different countries using LUNA, Terra's native token. Let me briefly explain this using UST (Terra's USD stablecoin) as an example:
- UST is pegged 1:1 to the US Dollar.
- If UST is trading above its peg, you can convert 1 US Dollar's worth of LUNA into 1 UST, profiting from the price difference by selling it.
- Conversely, if UST is trading below its peg, you can always convert 1 UST into 1 US Dollar's worth of LUNA.
This model faced skepticism from the moment it was introduced. From the birth of LUNA to its decline, various well-known figures in the crypto community warned that LUNA was nothing more than a Ponzi scheme. However, despite these warnings, many people continued to pour into this dangerous territory. So why is that?
(Note: The translation provides an overview of the content, but the specific details may require further clarification based on the context and additional information available.)" |
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Post time 13-9-2023 14:11:36
