“I felt like I was going to die.” In early May, a so-called “Chancers”, a cryptocurrency investor, watched helplessly as the price of its tokens collapsed. Among them, Luna and TerraUSD (UST), a stable currency whose value is pegged to that of the dollar. The Moon, which was still trading at $ 86 a unit on May 5, plummeted below the dollar a week later. The TerraUSD meanwhile loses its par with the US fiat currency in the same time frame. Now it’s worth only $ 0.03.
“Chancers” claims they lost $ 2.4 million in this crypto crash. Exasperated, he goes on the evening of May 12 to the man responsible, according to him, for his misfortune: Do Kwon, the father of the two cryptocurrencies and the chain of Earth blocks on which they are based. “Chancers” is determined to get an explanation from the South Korean businessman based in the capital, Seoul. But she is the latter’s wife who opens the door. She gets scared. In addition to being ruined, the intruder is finally arrested by the local police, reports the BBC.
Fortunately for Do Kwon, not all of the unfortunate owners of Luna and UST act as “Chancers”. But the story well illustrates the degree of dissatisfaction with the thirty-year-old young man. “Scammer” at the head of a “Ponzi scheme”, compared to the fallen star of Silicon Valley Elizabeth Holmes … On the social networks there are criticisms against the former engineer who worked for Microsoft and Apple and graduated in computer science from Stanford (STATES UNITED STATES OF AMERICA). A lawsuit was also filed by South Korean investors. Cryptocurrencies launched by Do Kwon together lost nearly $ 40 billion in value during the cryptocurrency crash. The disappointment actually lived up to expectations in the Earth ecosystem … and in Do Kwon.
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The beginnings are promising. The former engineer launched Terraform Labs in 2018 and with his own blockchain immediately attracted 40 million users. The following year he is among the 30 profiles to follow in the world of finance, according to the reference economic media from across the Atlantic, Forbes. Then it launched TerraUSD in September 2020 when two giants already dominate this market, Tether and USD Coin. A real bet. “Stability, an essential condition for the angle wins the trust of users and can be used as a means of payment, it is not easy to reach “, comments Nathalie Janson, associate professor at the Neoma Business School in Rouen. Tether – still the most appreciated today – is based on a simple but very expensive rule: each issued token must be covered by its dollar equivalent, guarantee in case of massive liquidation.
Do Kwon innovates by launching TerraUSD on an algorithmic model. “The idea is to have a self-regulation mechanism that allows the currency to stabilize around the dollar. And this, using the other cryptocurrency, the Moon, as a guarantee instead of the dollar itself,” continues Nathalie.Janson. Convinced, Coinbase Venture or Galaxy Capital financially support the Do Kwon project. Even the world of cryptocurrencies. The “Lunatics”, the community around the Moon and Earth, firmly believe in the sustainability of this system. This is also explained by his philosophy. “The cryptocurrency movement is a countermovement to repeal itself from the banking system. stable currency it has the merit of no longer being dependent on a fiduciary currency, “adds Nathalie Janson. At the time, Do Kwon impresses.
Cheater or not?
But what Terra particularly likes comes from Anchor, a decentralized finance protocol (DeFi). Do Kwon assures you that by leaving your TerraUSD there, used for loans, you can get returns of up to 20%. Unheard of in the world of stable coins. “This product has greatly facilitated the incredible growth of TerraUSD and therefore of Luna, which have become among the most valuable assets in the ecosystem,” notes cryptocurrency specialist Philippe Herlin. The other side of the coin: Veteran economist Frances Coppola specifically points out to Do Kwon on Twitter that the risks associated with DeFi are high and that the slightest shake in the market could cause massive withdrawals, which her algorithm would have. very difficult to contain. The Korean replies that she does not argue with the “poor”.
“His inexhaustible optimism and personality also helped bring people into his system,” according to Philippe Herlin. Protrusions of this type accumulate. Eight days before the crash, and when the market is already bearish, he confides in an interview that it’s fun to see weaker companies collapse. Implicit: everything will be fine for Earth and Moon. Cynical Destiny: So Kwon’s arrogance turned against him. “The TerraUSD and the Moon dived. Both the algorithm and the security mechanism put in place – the Terra foundation held bitcoin, in case the Moon was insufficient as collateral – have failed. In the cryptocurrency community there has been debate. on the form of stable currency which would be the most promising. There, of course, algorithmic models take a hit, ”decodes Nathalie Janson.
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To his one million Twitter followers, Do Kwon still presents himself as the Stablecoin Master (master of stable tokens). On Wednesday, May 25, his community voted to relaunch the Terra blockchain around a new token. Another Moon, but without stable currency associated algorithm, this time. A new start with new rules. Binance or Crypto.com platforms have already planned to list it. All former UST and Luna owners will receive some for free. What to restart the machine? “It will be complicated, its credibility has been severely damaged,” notes Philippe Herlin. Regardless of the nature of this new token and its ambition, the still young and unstable cryptocurrency market relies heavily on trust. “Now, who can trust Do Kwon now?” asks the economist. Certainly not “chancellors”.
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