Stablecoin Centralization Issues

Shaan Puri shares his experience with the Terra/LUNA crash, explaining how the project attempted to solve cryptocurrency's stablecoin problem and ultimately failed catastrophically. His perspective comes from both being an investor who lost money and someone who closely followed the project's development and downfall.

Key Points:

• The Stablecoin Problem:

  • Bitcoin and Ethereum aren't good as actual currencies
  • Merchants don't want to accept crypto due to price volatility
  • Traditional stablecoins (USDC, Tether) are centralized, requiring trust in companies

• Terra/LUNA's Solution:

  • Created a decentralized stablecoin (UST) backed by LUNA
  • Initially focused on ecommerce payments in Korea
  • Offered 20% interest rates to attract users
  • Raised $1B from investors to subsidize growth

• Personal Investment:

  • Initially invested $25K
  • Added $200K more at ~$40/LUNA (40% discount to market)
  • Investment peaked at ~$750K in value
  • Lost everything when LUNA crashed to nearly zero

• The Crash:

  • Critics warned about death spiral risk
  • Someone executed $1B coordinated attack
  • Project collapsed in 24 hours
  • Wiped out $48B in value

• Personal Lessons:

  • Not traumatized because risks were understood upfront
  • Important to limit exposure (no more than 15% in any project)
  • Market downturn is motivating to focus on earning
  • Need to keep working rather than relying on market gains

• Leadership Issues:

  • Do Kwon became egomaniacal
  • Called critics "poor" and "stupid"
  • Challenged billionaires to attack the system
  • Previously failed at similar project (Basis Cash)