Unchained

Why Terra Collapsed and Whether an Algo Stablecoin Can Ever Succeed - Ep.352

May 17, 2022

In this engaging discussion, Nic Carter, a partner at Castle Island Ventures, Eric Wall, a former CIO at Arcane Assets, and Erik Voorhees, founder of ShapeShift, delve into the downfall of Terra and its algorithmic stablecoin. They debate the misconceptions surrounding UST's stability and the market dynamics that led to its collapse. Opinions vary on whether algo stablecoins can succeed, with Erik sharing how his views evolved. The trio also addresses the arrogance of Terra's founder, risks of liquidity issues, and the critical lessons the crypto industry must learn.

01:21:38

Creator website

Episode guests

Erik Voorhees

Eric Wall

Nic Carter

AI Chapters

Episode notes

Intro

2min

The Fragility of Algorithmic Stablecoins

6min

The Collapse of Terra: Understanding Market Dynamics

11min

Rethinking Stablecoins: Decentralization vs. Centralization

10min

The Risks of Experimentation in Stablecoins

10min

Examining Arrogance and Accountability in the Terra Collapse

5min

Collapse of the Terra Ecosystem: Risks and Repercussions

17min

Bitcoin Collateral in Stablecoin Systems

7min

Stablecoins vs. the Dollar: A Trust Dichotomy

8min

10.

The Collapse of Luna: Lessons Learned

5min

Nic Carter, general partner at Castle Island Venture, Eric Wall, former Chief Investment Officer of Arcane Assets, and Erik Voorhees, founder of ShapeShift, discuss what happened with the TerraUSD (UST) and LUNA fiasco, Do Kwon’s responsibility, the impact on the crypto ecosystem, and much more. Show highlights:

how Erik used to feel that algo stablecoins were impossible and why he changed his mind
why Eric considers that the demand for UST was tied to a sh*tcoin
why Nic didn’t think LUNA would work
how a stablecoin could theoretically be decentralized
whether Nic, Eric, and Erik think this was a deliberate attack
why they think whether or not there was a deliberate attack is not even relevant
how the de-peg started with a liquidity issue on Curve
why Nic thinks that Terra’s biggest mistake was the 19.5% APY on Anchor
whether pursuing a decentralized stablecoin is a worthy goal
what aspects of UST were decentralized, according to Erik
whether algo stablecoins are dead or whether in the future, death spirals of algo stablecoins can be avoided
why Erik believes that everything in the crypto space is an experiment, even BTC
what it says that the VCs behind Terra knew were so reputable
why Do Kwon's arrogance and inexperience might have caused this chaos
whether Terra can be rebuilt
whether this collapse imposes risks on other blockchains and other assets
why the Luna Foundation Guard’s purchase of Bitcoin might have made the UST collapse even worse
what Erik thinks about the global financial system and the US dollar
how this event could trigger more regulation in the crypto space and why it might hurt the entire ecosystem
how regulators might use the Terra case to impose CBDCs.