One of the biggest failures in crypto Ever is Tera Luna customers lost Billions today we're going to explore The rise and fall of teral Luna it's Stablecoin Tera USD us and the villain Behind it all do Quan dwan is a South Korean entrepreneur and the co-founder Of terraform Labs the company behind the Teral Luna blockchain launched in April 2019 the platform quickly became popular With its lofty goal of combining the Stability of the dollar with the benefit Of crypto but the real DJ will tell you Its popularity came because of the 20% Yield on your stable coin but we'll get Into that later terraform lab set out to Create a stable coin ecosystem that can Support a wide range of financial apps From payments to savings to Investments Tera blockchain included two primary Crypto tokens Tera AKA Luna and Tera USD AKA us Tera USD was designed as an Algorithmic stable coin with the purp Purp of maintaining a stable value to The US dollar Luna was used to stabilize The price of us through a complicated Process that allowed users to swap Luna And us with algorithms running in the Background that kept the price pegged to $1 the concept behind Terra us can be Broken down into four different parts First part Peg mechanism the core Mechanism allowed for the exchange of One Terra USD for $1 worth of Luna and
Vice versa at current market rates if The price of US deviated from its $1 Peg Arbitrage opportunities were created Second was Arbitrage incentives Traders Could profit from the price Discrepancies for example if us fell to 98 cents arbitragers could buy us for 98 Cents and swap it for $1 worth of Luna Profiting from the difference this Action would reduce the US Supply and Push its price back up towards $1 on the Flip side if us price Rose above a Dollar Luna could be swapped for more Us Increasing us Supply and lowering its Price back down to the peg then this was Done through the third mechanism burning And menting this process allowed for the Burning or destroying of one token and The menting or creating of the other if Us was swapped for Luna us was burned This is how the supply was reduced and Finally the fourth part supply and Demand Dynamics the system relied Heavily on supply and demand Dynamics And theic efficiency of the arbitragers In the market the theory was that by Managing the supply of us and Luna Through these swaps the pay can be Maintained without any centralization it Would stay a dollar Forever this system That kept tera's ecosystem stable was Smart and Innovative but not without its Risks it used these four rules to keep Its value steady like referees who made
Sure the game was played Fair however if Confidence in either us or luna faltered Or if there's a mass attempt to exit the System system it could lead to a death Spiral where the value of both tokens Could collapse and that's exactly what Happened in May of 2022 the nightmare Scenario unfolded and massive amounts of Us were sold off leading to a loss of Confidence in the teral Luna ecosystem And a failure of the mechanisms to Maintain the peg to $1 caused both us And Luna to go into a freef fall dquan Attempted to deploy more Capital but it Was too little too late the collapse of Ter resulted in a total loss of roughly $40 billion in market value that's Nearly one Enron it affected countless Crypto holders the collapse raised huge Concerns regarding the stability of Algorithmic stable coins and The Wider Crypto Market as a whole following the Collapse dquan and terraform Labs face Intense scrutiny legal challenges and Investigations in several countries Authorities have been looking into the Causes of the collapse the actions of Terraform labs and its leadership their Real estate purchases and whether or not They committed fraud dwan's situation Has been evolving though with many Countries wanting to take legal action Against him and his company with New York and South Korea leading the charge
Quan was initially given a four-month Sentence for his crimes Landing him in a Monegro prison after being arrested for Attempting to use a fake Costa Rican Passport on his way to Dubai sounds like Catch Me If You Can Quan was released to A shelter for foreigners ERS preventing Him from leaving the country and this Part of the Saga is still ongoing so That's the rise and fall of teral Luna It's stablecoin us and the controversial Figure of dwan the collapse reminds us Of the risks and volatility in the Crypto markets especially in projects That promise unusually high returns like 20% apy on us that attracted so many Such high rewards often come with Equally high risks highlighting the Importance of research and due diligence Do your own research is not just a meme And as you start your crypto Journey use Teral Luna as a cautionary tale it might Save your entire portfolio that's all I Got from discover crypto my name is Dey And I'll see you without your Algorithmic stable coins at the top
