- Cecilia Bari
- BBC News World
Do Kwon is an elusive figure and hasn’t given any interviews since the collapse of his cryptocurrency Terra.
That’s 40,000 million dollars disappeared overnight.
This is the amount lost by those who invested in two cryptocurrencies whose value plummeted on May 13: moon and earth (also known as UST), both created by 30-year-old South Korean tech entrepreneur Do Kwon.
His story is like that of many child prodigies who arrive in Silicon Valley with the idea of creating the next big innovation that will revolutionize the market.
Kwon studied computer science at prestigious Stanford University in the United States and worked as a software engineer at Microsoft and Apple, until he founded Anyfi, a technology company dedicated to developing connectivity alternatives.
But the creation that made it known around the world came in 2018 with Terraform Labs, a software developer based in Singapore.
Do Kwon founded it with Daniel Shin, with the aim of building payment systems based on blockchain technology.
At that time, the entrepreneur claimed to create a “modern financial system” that users could use without having to resort to banks or any other type of intermediary.
This is how he entered the world of cryptocurrencies, gaining the support of large companies like Binance, who believed in the potential of their cryptocurrencies.
Forbes considered him one of the great, successful young professionals in the world of technology, and before long it seemed the entrepreneur had the world at his feet.
Without any humility, Do Kwon called his lunar cryptocurrency “my greatest invention” and proclaimed from the rooftops the qualities of digital currency to “change the world”.
He also posted on his Twitter account (@stablekwon) that he called his daughter Luna “The name of my most beautiful creation inspired by my greatest invention”.
Copyright of the photo, Twitter
“The name of my most beautiful creation inspired by my greatest invention” tweeted Do Kwon
The madmen and the cult of personality
It quickly gained the trust of a select group of investors who were proudly referred to as “insane” (named after the coin).
Kwon’s firm has raised hundreds of millions of dollars from major venture capital firms to finance its projects.
In a short time he gains the trust of the markets and convinces many “heavyweights” of his risky trading bet based on algorithms created in his own laboratory.
Unlike bitcoin, whose creators are unknown, “Kwon coins” – as they are called in the cryptocurrency environment – are directly linked to a person.
Among the followers is Mike Novogratz, CEO of Galaxy Digital, who announced his support by getting a “I’m officially crazy” Moon tattoo.
The confidence of some large investors in the entrepreneur has reached such a level that the host of the podcast “Mission: DeFi” declared that there was a “cult of personality”.
Because Moon and Earth are “twin” currencies.
Do Kwon launched the cryptocurrency luna in 2018 and two years later created terra (UST), a digital currency that belongs to the category of “stablecoins” or stable currencies.
Unlike other cryptocurrencies, “stable” ones are given this name because they are tied to a less volatile asset, such as the dollar.
It is a very different type of currency from digital currencies like bitcoin or ether, just to name a few.
Copyright of the photo, Getty Images
On Twitter, Kwon asked the community that had invested in the land for “patience”
The moon-earth duo has their own mathematical formula created at Terra Labs, where the value of one depends on the other and that is why they are known as “twin coins”.
Terra, on the other hand, is an “algorithmic stablecoin” which, through complex calculations, always had to maintain a value of 1 USD. No more, no less.
All seemed to be working fine, until criticism began to mount, warning that Kwon’s creation – seen by some as a work of genius and by others as a Ponzi scheme – could fall apart at any moment.
The collapse
The market has lost faith in Kwon’s algorithmic formula due to falling cryptocurrency prices and bad economic news.
Luna lost all of its value (dropped from $ 118 to $ 0.09) and terra collapsed just as fast.
The sharp decline in both currencies has encouraged panic among some investors who have embarked on a cryptocurrency sell-off, leading to an overall decline in the industry.
“My heart is broken by the pain my invention caused everyone,” Kwon tweeted when the scandal erupted.
Big investors have lost billions of dollars, even though deep down they knew the risk they were taking, since they have an army of analysts and cryptographers who study every investment thoroughly.
The problem is, as always, for small investors, that is, people who – without understanding the algorithmic complexities – trust something that will theoretically make them easy money.
In a Reddit social networking forum, some users posted their struggles and even shared suicide prevention phone numbers.
“I felt like I was going to die”
A desperate man was arrested after visiting Do Kwon’s home following the collapse of the twin rooms.
He told the BBC his life was in tatters.
Copyright of the photo, News 1
“Chancers” was photographed leaving the police station after being interrogated.
“I felt like I was going to die,” said the user known as Chancers.
“I lost a lot of money in a short time. About $ 2.4 million of my cryptocurrencies have disappeared.”
Others, on the other hand, instead of losing money, got rich by withdrawing their investments before the crash.
For example, Martin Baumann, co-founder of CMCC Global, a Hong Kong-based venture capital firm, said his company sold its currencies in March for around $ 100 each, according to the New York Times.
While it may seem hard to believe, Do Kwon announced a few days ago the relaunch of its lunar coin, version 2.0.
Copyright of the photo, Twitter
But now the entrepreneur has opted for a low profile and no longer speaks in public.
Perhaps due to the lawsuits that will bring some of the victims of the collapse of their sister currencies. Perhaps because this time it tries to rearm with another strategy.
In any case, in the few days of Luna 2.0’s life, the results indicate that this time it will be much more difficult to convince the world of its genius.