A Terrable Day - The Daily Gwei #478
Another one bites the dust.
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The last 24 hours in the crypto ecosystem have been some of the craziest I’ve ever experienced. For those of you who have no idea what I’m talking about the tl;dr is that the popular stablecoin UST de-pegged considerably hitting a low of $0.60 and the associated LUNA token fell over 50% in 24 hours (you can read a full breakdown of this event here). This led to a market-wide sell-off and a total loss of confidence in the UST stablecoin.
This isn’t the first time one of these “algorithmic stablecoins” has imploded - DSD/ESD, BAC, AMPL are just some of the previous ones that went to ‘goblin town’. The common denominator? They all use ponzi-like mechanisms to grow their market cap which results in a very reflexive feedback loop in both directions. Of course, they all end the same way - a very violent unwinding that destroys most participants and proves yet again that algorithmic stablecoins just do not work and people need to stop building them.
In saying that of course people are going to keep building systems that they think can make them easy money and in a permissionless world no one can really stop them - and that’s totally okay. With these decentralized systems that we’re building we have to take the bad with the good so we can’t expect every single project to be built in good faith or to be economically sound. Though the problem is that there are plenty of people who actually buy into the bullshit being spread by these project founders and believe that what’s being built is actually sustainable - this is the most dangerous aspect of these systems.
Lastly, I really hate the trend of populism and cults of personality in crypto that always seem to form. There’s plenty of examples and Terra is indeed one of them as anyone who followed the founder Do Kwon’s Twitter account would know. These cults of personality literally never end well - Charles Hoskinson, Daniele Sesta, Andre Cronje and more have all ended in disaster. Though I understand that this isn’t just a crypto thing - it’s a human nature thing - but I hope that we can at least learn from these experiences and stop repeating the same mistakes.
All in all I will personally keep encouraging people to build more sustainable and decentralized systems. I’m getting real tired of the same old ponzis, forks and low-effort projects attracting lots of attention and capital only to inevitably blow up. It’s not what I’m in this ecosystem for and it’s certaintly not want I want crypto to be known for - let’s all aim to do better.
Have a great day everyone,
Anthony Sassano
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