The scale of the human wreckage and pain inflicted by Do Kwon through the collapse of his fatally flawed Terra blockchain and reckless egotism continues to reveal itself. It is now clear that the promise of 20% returns on “stable” savings placed in the network’s Anchor protocol attracted scores of average people to pile in, with catastrophic results.
Those victims are understandably interested in plans to rebuild Terra, and, one hopes, to regain the value of the effectively worthless tokens they are left holding. Kwon’s blockchain was built around a stablecoin, UST, and a related free-floating cryptocurrency, LUNA, meant to keep the stablecoin algorithmically pegged at $1.
This article is excerpted from The Node, CoinDesk's daily roundup of the most pivotal stories in blockchain and crypto news. You can subscribe to get the full newsletter here.
This distribution discussion is complicated and also a complete waste of time because there should be no reconstitution of Terra at all.
Certainly, Terra shouldn't be rebuilt by the team that developed such a flawed network in the first place. And even more certainly, Terra shouldn’t be rebuilt using money that by rights should be returned to the people who made the mistake of trusting Kwon in the first place.
See also: Do Kwon Is the Elizabeth Holmes of Crypto | Opinion
Luna holders seem to agree – over 90% of voters were against Kwon’s latest “recovery plan” (which seemed to have mostly left out the “plan” part).
We shall (not) arise
There are many, many reasons Terra should be left to die.
But Kwon’s declaration on Monday that “Terra is more than UST” has got to be one of the more ridiculous and misleading statements yet from a man known for them. Terra isn’t more than UST: The “decentralized dollar” was the chain’s main purpose and reason for existing. Everything else was window dressing.
Binance CEO Changpeng Zhao agreed, and described an earlier proposal to fork and relaunch Luna as “wishful thinking.”
So removing UST from Terra will result in a chain with no real reason to exist and no real reason to hope for any kind of price recovery or stability. Kwon’s insistence that the Terra community is great is just a friendly way of saying, “I’ve got no ideas, let’s ask the audience.”
The second reason Terra shouldn’t be restarted is related to the first. With trust in leadership broken and no fundamental reason for existing, you can safely assume that the project’s new cryptocurrency would sell off aggressively as soon as it was launched (though the plan does include some lockups).
See also: UST's Do Kwon and the Human Cost of Lunatic Exuberance | Opinion
This could give insiders yet another chance to market holdings they know are fundamentally worthless and dump those holdings onto retail traders still high on a mix of hopium and despair. We’ve seen over the last few days that low-information speculators continue to buy the worthless LUNA token, and so there’s no reason to think they would stop on a new chain.
The final reason Luna shouldn’t be reconstituted is that Kwon shouldn’t continue to have a platform within the blockchain industry. He has proven himself both inept and toxic, and there is increasing evidence of explicitly deceptive behavior. That includes failing to disclose his work on a failed algorithmic stablecoin called basis cash and marketing materials that dramatically overstated UST’s stability.
We will learn a lot more about Kwon’s choices in the coming months and years, as we’re now seeing reports of a wave of civil and criminal proceedings launched against Kwon and Terraform Labs. Those proceedings could also lead to the only thing that might resemble justice here: taking real money from the pockets of Do Kwon and his collaborators and giving it back to the people they so dramatically failed.
Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.