Bitfinex and Tether chief technology officer (CTO) Paolo Ardoino recently commented on the Terra (LUNA) project scandal, suggesting that it wasn’t meant to be a rug pull, but rather fell owing to a bad design.
On the Reimagine Unplugged podcast, Ardoino commented on Terra’s crash, noting that the algorithmic stablecoin TerraUSD to a “castle of cards“, not with malicious intent but a design that was set to fall at any time.
The cryptocurrency community have been pointing out the possible red flag signs in the actions of Terraform Kabs founder Do Kwon regarding the project’s development. From reported tax evasion to unregulated activity, there is scepticism coming from the community about whether the project was designed to steal money from users as a rug pull or whether the project just failed.
Ardoino’s comments put the project down as a failed design with a founder with enough “arrogance” in his self-belief that the project would perform. In the podcast, he stated:
“I don’t know Do Kwon. But let’s give him the benefit of the doubt. He created this project with arrogance and with thinking that he was right and many were supporting him, of course, probably for economic reasons, but was not per se, a rug pull, it was a project that was poorly designed as many projects are poorly designed… That there was like a castle of cards and it could fall down, but of course he couldn’t say it, because otherwise it would have fallen down much faster. And again, it was clear to me, it was clear to many that I know that it was a bad idea.”
“It’s all fun and games until you are a 10 billion stablecoin. And then it becomes much harder the faster you grow, the more you grow, right, because if you are a stablecoin, especially an algorithmic stablecoin..” https://t.co/UNuvNhZoP9
— REIMAGINE – Web3 Events and Media (@REIMAGINE_2021) May 18, 2022
The Tether CTO continued, saying that Terra’s stablecoin (UST) had not scaled properly and became too big, too quickly, to maintain its peg. With Bitcoin as its main collateralisation, as UST crashed, it had to sell collateral, which led to further declines in the value pulling the stablecoin further from its peg. As per Ardoino:
“They were basically in a cascade situation where they had to defend the peg so they have to sell the collateral and selling the collateral was causing additional crashes and these additional crashes were pushing them to sell more or collateral and so on and so forth.”