That memes and classic insults Terra CEO Do Kwon has now yelled at critics on Twitter with hollow irony amid heavy liquidations and a dollar-based stablecoin now 95 cents below its price.
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 pegs Kwon’s stablecoin to the greenback, Younessi said, could one day fail and trigger a “death spiral” if Terra’s ecosystem drains capital too quickly.
Younessi was not alone. A small industry chorus has warned of Terra’s danger and instability, including Charles Cascarilla, CEO of stablecoin issuer Paxos, who publishes monthly certifications that his Paxos dollar is backed 1:1 with fiat reserves and debt, and Kevin Zhou, Co-founder of crypto trading fund Galois Capital.
Kwon, 30, dismissed her concerns with more trash talk.
But now even Kwon has to admit that Younessi, Cascarilla and Zhou were right all along. After all, he drove them last nail in UST’s coffin itself.
The hubris
Hubris is commonly thought of as excessive pride, although Aristotle did not use it that way: “Hubris consists in doing and saying things that bring shame to the victim…simply for the pleasure of doing so.” Young men and the rich are arrogant because they think they are better than others.”
Two millennia later, Aristotle may be a pile of bones, but his words paint a vivid portrait of Kwon, the CEO who not only believed he was too smart and too popular to fail, but who publicly did so threatened competitors and admitted his delight at seeing others fail.
Do Kwon: “95% will die [coins]but it’s also fun to watch companies die.”
8 days ago. Ironic. pic.twitter.com/fEQMZIyd9a
— Pedro🌐 (@EncryptedPedro) May 11, 2022
Its own failure has taught the industry more than one lesson about not building algorithmic stablecoins: It’s a sobering reminder of the cult of personality that allows the likes of Donald Trump and El Salvador President Nayib Bukele to use it to silence critics bring to power of their egonot the validity of their arguments.
Kwon’s promise was up there at MAGA: He would make Terra the “biggest decentralized money in crypto, period.” As long as he gave his LUNAtics reasons to believe in him, aka wins, he didn’t have to answer to anyone.
Then came May 9, 2022 when UST fell 20 cents below its rate.
The humiliation
Terra’s collapse exposed how little we knew about Kwon beyond his LinkedIn and Twitter profiles. He graduated from Stanford with a computer science degree in 2015 and briefly worked at Microsoft and Apple before founding Terra.
Two days after the UST crash began, CoinDesk reportedly referred to Kwon as “Rick” — a nod to half of the cartoon duo in “Rick and Morty” — behind another failed algorithmic stablecoin project called Basis Cash (BAC), which lost its dollar peg for well early last year. BAC is now worth a fraction of a cent.
Still, Kwon seems to be steadfast. After two days of Twitter silence last week, he finally picked up the heat for UST’s historic failure. He also appears to have set himself the task of rebuilding Terra. On Monday, he proposed forking LUNA’s blockchain and renaming the current chain Terra Classic, with the new chain being wiped off by UST.
Kwon’s proposal met with an almost unanimous rejection in a pre-vote on the Terra community forum. Many would prefer to hear Kwon Changpeng Zhao’s excitation to buy and burn most of LUNA’s hyperinflated circulating supply of 6.5 trillion tokens. Kwon knows what the community wants, but it is him argue against. This time he pitches in critical and constructive Conversations with his critics instead of just dismissing them outright.
He also has very real heat on him. Angry investors and troubled Twitter users have hurled all sorts of accusations at him, including allegations of fraud and insider trading. Local Korean sources have said he may have evaded taxes, although he appeared to dismiss those rumors this weekend, saying he has come to terms completely with the Korean government.
The crypto community will be in the coming weeks – months? – Sorting facts out of FUD, but Kwon is going nowhere, meaning Terra, solvent or not, stays on everyone’s radar. Kwon’s charming hubris and digital fool’s gold may have been a heady vision for his flatterers, but the faucet has run dry and the room has gone sober. At least for now.
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