Jeremy Allaire, CEO of Circle, the company that issues the second-largest stable coin, USDC, says he predicted the collapse of Terra and UST’s algorithmic stablecoin six months ago because it’s a “house of cards.”
“There were two things that surprised me. One was just how quickly this collapse happened and how much value was destroyed,” Allaire said in an interview. “I was dumbfounded, and I had never seen anything evaporate so fast in 72 hours.”
Allaire added that he was surprised by the massive support for Terra and UST, despite the “clear” risks. The USDC differs from the UST in that the assets back it. At the same time, the latter relies on stimulus-based algorithms driven by Terra’s LUNA cryptocurrency to maintain its commitment to the US dollar.
Last week, the UST lost its fixation on the dollar, leading to the erasure of billions of dollars from Terra’s ecosystem, dragging the cryptocurrency market down with it. Secured stable coins USDT and USDC maintained their fixation against the dollar during market turmoil, while most algorithmic stable coins, such as DAI, also went through some turbulence. Algorithmic stable coins are the “holy grail” of decentralized digital currencies and will be developed by others, Allaire added.
According to the recovery plan, Terra will ‘be reborn’. Data at the time of writing show 77.9% support the project, while 10.5% are against it, with 33% of those who voted for Terra’s management.
The voting quorum is 40% (out of 376 million) and ends on May 25. Kwon backed the vote on Twitter, adding that it would “come forward” if the proposal was successful.
Kwon’s revival plan rejects UST’s algorithmically stable coin and proposes the creation of a new chain called Terra (LUNA). At the same time, the existing network and cryptocurrency will be renamed Terra Classic and LUNA Classic (LUNC).
On Tuesday, a preliminary vote showed 92% of the nearly 7,000 votes against an earlier version of Kwon’s proposal before Terra’s chief executive updated the plan.
Critics of Kwon argue that the hard fork of the Terra blockchain, included in the leader’s original plan, is unnecessary, suggesting a reduction in LUNA’s supply by burning tokens.
As unexpected as these events were, why do they seem familiar to everyone…