Some noticed it coming. In 2018, Cyrus Younessi, an analyst at crypto funding agency Scalar Capital, noticed UST’s white paper and instantly warned his boss. The algorithm pegging Kwon’s stablecoin to the dollar, Younessi stated, might at some point fail and trigger a “loss of life spiral” if Terra’s ecosystem was drained of capital too shortly.
Younessi wasn’t alone. A small refrain within the trade warned of Terra’s hazard and instability, together with Charles Cascarilla, CEO of stablecoin issuer Paxos, which publishes month-to-month attestations that its Paxos greenback is backed 1:1 with fiat reserves and debt devices, and Kevin Zhou, co-founder of crypto buying and selling fund Galois Capital.
Kwon, 30, dismissed their considerations with extra trash discuss.
However now, even Kwon has to concede that Younessi, Cascarilla, and Zhou have been right all alongside. In any case, he drove the final nail in UST’s coffin himself.
Hubris is often regarded as extreme delight, though that’s not how Aristotle used it: “Hubris consists in doing and saying issues that trigger disgrace to the sufferer … merely for the pleasure of it. Younger males and the wealthy are hubristic as a result of they assume they’re higher than different individuals.”
Two millennia later, Aristotle could also be a pile of bones, however his phrases paint a dwelling portrait of Kwon, the CEO who not solely believed he was too sensible and too widespread to fail, however who publicly threatened rivals and confessed his pleasure in watching others fail.
Do Kwon: “95% are going to die [coins], however there’s additionally leisure in watching corporations die too”
His personal failure has given the trade greater than a lesson on how not to create an algorithmic stablecoin: It’s a sobering reminder of the cult of persona that permits individuals like Donald Trump and El Salvador President Nayib Bukele to silence critics with the force of their ego, not the soundness of their arguments.
Kwon’s promise was up there with MAGA: He was going to make Terra “the most important decentralized cash in crypto, period.” So long as he gave his LUNAtics causes to imagine in him, aka earnings, he didn’t have to reply to anybody.
Then got here Might 9, 2022, when UST fell 20 cents under its peg.
Terra’s collapse dropped at gentle how little we knew about Kwon past his LinkedIn and Twitter profiles. He graduated from Stanford in 2015 after learning pc science, and briefly labored at Microsoft and Apple earlier than forming Terra.
Two days after UST’s plummet started, CoinDesk allegedly doxxed Kwon because the “Rick”—a reference to half of the cartoon duo in “Rick and Morty”—behind one other failed algorithmic stablecoin mission referred to as Foundation Money (BAC), which slipped its greenback peg for good early final yr. BAC is now price a fraction of a penny.
Nonetheless, Kwon seems steadfast. After two days of Twitter silence final week, he lastly took the heat for UST’s historic failure. What’s extra, he seems to have risen to the duty of rebuilding Terra. On Monday, he proposed to fork LUNA’s blockchain and rename the present chain Terra Classic, with the brand new chain wiped of UST.
Kwon’s proposal was met with near-unanimous disapproval in a preliminary vote on Terra’s neighborhood discussion board. Many would favor Kwon take heed to Changpeng Zhao’s suggestion to purchase and burn most of LUNA’s hyperinflated circulating provide of 6.5 trillion tokens. Kwon is aware of what the neighborhood desires, however he’s arguing against it. This time, he’s participating in critical and constructive conversations along with his critics, as an alternative of simply dismissing them outright.
He additionally has very actual warmth on him. All method of accusations have been hurled at him by offended traders and stressed Twitter customers, together with allegations of fraud and insider buying and selling. Native Korean sources have stated he might have evaded taxes, though this weekend he appeared to dismiss these rumors, saying he’s absolutely settled up with the Korean authorities.
The crypto neighborhood can be sorting reality from FUD within the weeks—months?—to return, however Kwon isn’t going wherever, which implies that, solvent or not, Terra stays on everybody’s radar. Kwon’s charming hubris and digital idiot’s gold might have been an intoxicating imaginative and prescient for his flatterers, however that faucet ran dry, and the room has sobered up. No less than for now.
Wish to be a crypto skilled? Get the most effective of Decrypt straight to your inbox.
Get the most important crypto information tales + weekly roundups and extra!