Binance CEO Shares Lessons Learned From Terra Fall, Says He is 'Pleased by the Crypto Industry Resilience'
Categories: Crypto News US
Addressing the historic fall of the Terra (LUNA) ecosystem, major crypto exchange Binance CEO Changpeng Zhao (CZ) said that he is "pleased by the resilience the crypto industry has shown." However, he also shared some lessons that the industry should learn from the Terra fallout.More precisely, in a recent blog post, CZ said there are "many lessons" to be learned from the Terra crash in terms of design flaws.In the first place, when an asset is pegged to another asset using the third asset as collateral, there will always be a chance of a peg failure - even if the asset is over collateralized by 10x. That is because the volatile nature of crypto makes it possible for a collateral asset to crash by more than 10x in a matter of hours. Moreover, there were also design issues with Terra's burn-and-mint mechanism, which allowed the stablecoin terraUSD (UST) holders to swap UST 1 for USD 1 worth of LUNA and the aggressive sell-off led to the supply of LUNA increasing exponentially.CZ slammed Anchor Protocol’s 20% fixed Annual Percentage Yield (APY) rate, which was used to attract users to the ecosystem and convince them to lock their UST tokens. Notably, many had called Anchor a "Ponzi scheme" even way before the UST crash, arguing that it was not sustainable. The CEO also touched on Luna Foundation Guard's attempt to restore the UST peg by lending out billions in bitcoin (BTC). CZ claimed that this could have saved the ecosystem only if the foundation had acted sooner. At 8:55 UTC on Monday morning, LUNA is trading at 0.00019, up 12.5% in a day, down 11.5% in a week, and down 100% in a month. At the same time, UST stands at USD 0.065797, up 1.5% in a day, down 56% in a week, and down 93.4% in a month.Meanwhile, the broader crypto market is seeing improvements today as well: bitcoin and ethereum (ETH), for example, are up 2.7% and 3.6% over the past 24 hours, and they are down 3% and 4.2% over the past 7 days, respectively.