Some saw it coming. In 2018, Cyrus Younessi, an analyst at crypto investment firm Scalar Capital, saw UST’s white paper and immediately warned his boss. The algorithm that links Kwon’s stablecoin to the greenback, Younessi said, could one day fail and cause a “death spiral” if Terra’s ecosystem is drained of capital too quickly.
Younessi was not alone. A small industry chorus has warned of Terra’s danger and instability, including Charles CascarilleCEO of stablecoin issuer Paxos, which publishes monthly certificates that its Paxos dollar is backed 1:1 with fiat reserves and debt instruments, and Kevin Zhouco-founder of the crypto trading fund Galois Capital.
Kwon, 30, dismissed their concerns with more chatter.
But now even Kwon has to admit that Younessi, Cascarilla and Zhou were to the right all along. After all, he drove the end nail in UST’s coffin itself.
Pride is generally considered excessive pride, although it is not so. Aristotle used it: “Hubris is doing and saying things that bring shame to the victim…simply for the sake of it.” Young men and the wealthy are proud because they think they are better than others.
Two millennia later, Aristotle may be just a pile of bones, but his words paint a vivid portrait of Kwon, the CEO who not only thought he was too smart and too popular to fail, but who publicly threatens competitors and confessed his joy at seeing others fail.
Do Kwon: “95% will die [coins]but there is also entertainment in seeing companies die too”
Its own failure has taught the industry more than a lesson in how do not to create an algorithmic stablecoin: it’s a sobering reminder of the cult of personality that allows the likes of Donald Trump and Salvadoran President Nayib Bukele to silence critics with the strength of their egonot the correctness of their arguments.
Kwon’s promise was up there with MAGA: he was going to make Terra “the biggest decentralized currency in crypto, period.” As long as he gave his LUNAtics reasons to believe in him, that is to say profits, he was accountable to no one.
Then came May 9, 2022, when the UST fell 20 cents below its peg.
Terra’s collapse shed light on how little we knew about Kwon beyond his LinkedIn and Twitter profiles. He graduated from Stanford in 2015 after studying computer science, and briefly worked at Microsoft and Apple before forming Terra.
Two days after the start of the UST drop, CoinDesk reportedly doxxed Kwon as “Rick” – a reference to one half of the cartoon duo in “Rick and Morty” – behind another failed algorithmic stablecoin project called Basis Cash (BAC), which permanently lost its peg to the dollar early on from last year. The BAC is now worth a fraction of a penny.
Still, Kwon seems unwavering. After two days of silence on Twitter last week, he finally took the heat for the historical failure of the UST. Additionally, he seems to have taken up the task of rebuilding Terra. On Monday, he offered to fork the LUNA blockchain and rename the current chain Classic Earthwith new chain wiped from UST.
Kwon’s proposal was received almost unanimously disapproval in a preliminary vote on the Terra Community Forum. Many would prefer Kwon to listen to Changpeng Zhao suggestion to buy and burn most of LUNA’s hyperinflated 6.5 trillion token circulating supply. Kwon knows what the community wants, but he’s oppose it. This time he engages in critical and constructive conversations with his detractors, instead of just dismissing them outright.
He also has a very real warmth about him. Every kind of accusations thrown at him by angry investors and agitated Twitter users, including allegations of fraud and insider trading. local korean sources said he may have evaded taxes, although over the weekend he appeared to dismiss those rumours, saying he was fully arranged with the Korean government.
The crypto community will sort out the FUD facts in weeks – months? — coming, but Kwon isn’t going anywhere, which means that, creditworthy or not, Terra remains on everyone’s radar. Kwon’s charming hubris and digital fool’s gold may have been an intoxicating sight for his flatterers, but that tap dried up and the room sobered. At least for now.
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