[0] https://www.forbes.com/sites/stevenehrlich/2022/05/11/luna-n...
More like an algorithm gone wrong.
On basic: if ust coin(pegged to one dollar, so the target was to keep it at one dollar) lost value(under one dollar) new luna coins were created to buy ust coins.
So.. As long ust coin was under one dollar, it created more and more luna coins to buy ust coins.
I think luna started with like a few million coins and ended with something like 7 or 8 trillion coins, now the network is officially shutdown.
It was a horrible idea.
No matter how good your algorithm is, people will manipulate the open! Book of upcoming trades to make profits, and destroying the coin with it.
Its like knowing what vanguard bak will do, before they even start trading on top of that you can force them to trade im certain ways, because you know how they will react, with hundred percent accuracy!
It was doomed from the beginning.
They were paying existing holders a ridiculously high rate for staking. Where was this coming from if not from new buyers?
I’m not defending Terra, but we should be precise with our words lest we escape reality ourselves.
I think it was broadly understood that 20% yield wasn't going to be sustainable, but was a tool for short-term user acquisition.
Anchor generated revenue in 2 ways. The first is that it collects staking rewards for collateral that was deposited. The second is that it collected interest on the loans it lent to people. Some of what it was able to collect can be attributed to new buyers because an increase demand for UST increases the value of Luna. This combined with more gas fees means that bLuna holders will be paid out more. bLuna is one of the assets which can be used as collateral on Anchor. Even without new buyers there would still be profit that could be awarded to depositors.
The price of a stock can change drastically with almost no money changing hands compared to the market cap. Which would then not be a Ponzi.
2. The price of Luna kept going up
3. Volumes were massive
A Ponzi uses new investments to pay interest. If it doesn't get exponentially increasing revenue it collapses. Paying someone in more tokens or stock is different. If it collapses, it's for different reasons under different circumstances.
It's a lot easier to fabricate market cap than to fabricate cash.
Yeah:
> Sick of people calling everything in crypto a Ponzi scheme. Some crypto projects are pump and dump schemes, while others are pyramid schemes. Others are just standard issue fraud. Others are just middlemen skimming of the top. Stop glossing over the diversity in the industry.
The algorithm isn't good at all. Such catastrophic failure was predicted a few months ago by a lot of people independently. But it is difficult to predict the timing so only few people shorted it at the right time.
Specifically Anchor which was promising 20% returns whilst charging borrowers less than that on the same funds, seemed doomed to failure.
The Terra blockchain is a proof of stake blockchain where you can stake Luna in order to gain rewards from various fees the network collects. Unbonding your staked Luna takes 21 days to complete.
One of the assets which you could use as collateral on Anchor is bLuna. bLuna is a token that represents a Luna that is currently being staked. Anyone who holds bLuna is able to redeem the rewards that staked Luna has accrued since it was last redeemed. When you give it to Anchor as collateral Anchor will start paying it's depositors with those rewards. It is possible to convert a bLuna back into Luna, but this takes at least 21 days to complete as the unstaking process takes 21 days itself. If you don't want to wait that long you can just sell the bLuna to someone else for Luna.
I sell the LNA for 11BTC worth of dollars. A meteor comes and destroys the price of LNA, sending it to a penny. When my loan is due, I buy 120LNA for a buck twenty and pay it back. I keep all of the 11BTC worth of dollars, having essentially bought them for a dollar.
Something like that? Seems like it fucks lenders more than holders, but I'm guessing that a lot of holders use some trickery to act as lenders as well. Neat scam.
They sold for real USD. Or sold for another stablecoin (and then into real USD).
probably an attack exploiting bad algorithms, I wouldn't be surprised if the US regulatory captures stablecoins now and it somehow becomes necessary to police the whole world for 'financial terrorism' or something of that nature ...