UST: The Not So Stable Coin

Good Morning Everyone,

The hopes and dreams of many shitcoiners were shattered yesterday as Terra - the so called algorithmic stablecoin - lost its peg and went into freefall. It went as low as 0.61c and has since “recovered” slightly and is hovering around 0.70c at the time of writing.

It’s a rare day that I would waste a seconds energy on a shitcoin, but this scenario is simply too comical not to discuss, and while it sucks that many people likely will have lost a ton of money gambling on this rubbish, it should serve as a valuable opportunity for those of you that have broken free of the fiat mind disease and see these scams for what they are.

For those that have never heard of Terra let me give a tiny bit of background. I first heard about it a couple of months ago, and the only reason i likely did is because it was using bitcoin to collateralise it and back its peg. It was created by a South Korean named Do Kwon. Do Kwon did the rounds making a ton of noise and creating hype to launch it, and presumably to attract capital - touting it will usher in a “new monetary era”.

According to their website the protocol is explained as follows:

The protocol consists of two main tokens, Terra and Luna.

* Terra: Stablecoins that track the price of fiat currencies. Users mint new Terra by burning Luna. Stablecoins are named for their fiat counterparts. For example, the base Terra stablecoin tracks the price of the IMF’s SDR, named TerraSDR, or SDT. Other stablecoin denominations include TerraUSD or UST, and TerraKRW or KRT. All Terra denominations exist in the same pool.

* Luna: The Terra protocol’s native staking token that absorbs the price volatility of Terra. Luna is used for governance and in mining. Users stake Luna to validators who record and verify transactions on the blockchain in exchange for rewards from transaction fees. The more Terra is used, the more Luna is worth.

Do Kwon had made a statement back in March that he wanted to be the largest BTC holder aside from Satoshi, which triggered my scammy spidey senses at the time. Do yourself a favour and click play on this video.

I didn’t pay any attention beyond this until now, as it seemed kind of self explanatory that it was just another scam leveraging bitcoin to try and promote their racket.

But the speed at which this thing went from:

“We will be the largest BTC holder in the world” to “UST stablecoin peg breaking”

and

Is just too classic.

This clip of Raoul Pal as he is informed of the peg breaking captures the moment perfectly. Wait for it.

Jokes aside for a second, there are a couple of genuinely interesting points to note out of this s**t show. The first is that bitcoin is a transparent public ledger, and the fact that UST was backed by bitcoin means that we can see the bitcoin being sold to try and prop up the peg. I’ve included a couple of tweets below that include the addresses if you want to take a look in a bitcoin block explorer.

You also have to marvel at the beauty of a decentralized army that collates and researches in real time and shares information via social media in these instances. The capability of a decentralized community to monitor and track a scenario is really an incredible thing to witness and stands out to me as being a major positive force to have come out of the advent of the internet and social media more generally.

There is a more technical side to how this stable coin lost its stability, and it’s articulated well in this tweet below for anyone interested in understanding in a little more detail.

From my perspective the specifics are less interesting as this is simply another centralized shitcoin pretending to be something the world needs, and a predictable basket of greedy humans that fall for it and are left holding the bags.

The sad reality is that this really was so tediously predictable as Nic Carter says:

Anyway, enough timewasting talking about this scam for today.

I’ll leave you with this beauty from Mike Novogratz.

You really cannot make this stuff up.

In the words of Matt Odell, stay humble and stack sats.

Hope you have a great day. I’ll chat to you tomorrow.

AK

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