Sunday, September 25, 2022

Do Kwon is the founder of Terra and the face of the ecosystem. He is also very active on Twitter and often discusses Luna, UST and the advantages of algorithmic linking.

Tone

Well, I call it debating, but it’s usually far from a discussion. He often takes a very aggressive line with reports inquiring about the sustainability of the peg, the long-term profitability of Anchor and many other (valid) questions about the experiment UST.

Yesterday, his UST stablecoin was decoupled to 60 cents. As I write this, it is again around 90 cents, but the fear that trust in the system will be irreparably damaged remains. And one of the biggest reasons I’m worried about UST’s ability to recover in the long run is Do Kwon’s attitude as well as his silence throughout this whole debacle.

Just before things got really ugly, he posted below in his typical, casual tone.

Nothing else. Radio silence. His apology when he finally reappeared, almost 24 hours later? “Didn’t want to be so quiet – needed razor-sharp concentration to deliver, thanks to everyone for the support”. Mmmm.

I’ve been arguing for some time that Do Kwon doesn’t show the temperament, transparency, or maturity to run an ecosystem worth billions and billions of dollars (Luna was worth over $40 billion and $18 billion before it all imploded).

Centralization

But whether he is suitable or not, perhaps, is not the point. It is advertised as a decentralized stablecoin, which is exactly the reason that it uses the algorithmic peg. So why do we have to rely on the word of an individual? Why do we have to wait for the Luna Foundation Guard (LFG) to use its Bitcoin reserves in an extremely discretionary and opaque way? Is that really the definition of centralization?

Puzzle with me – what is the difference between the use of LFG’s Bitcoin reserves and the Fed’s open market operations with the USD?

This has the potential to become one of the biggest asset losses in history if Do Kwon and LFG cannot convince the market that the bond can be trusted again in the future. After such a public rush to the bench, it will be an incredible comeback if he makes it, and I will definitely take my hat off to him.

I’m just afraid the silence from him during yesterday’s meltdown says measures about the extent of the damage and how deep this crisis really is. If you are talking about a run to the bench, the game is over as soon as the confidence is gone. So whether this trust can be restored or not, everything is worth it here.

Considering this, Do Kwon’s next tweet could be the most important in the history of Terra.