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The <\/span>memes<\/span><\/a> and <\/span>classist slurs<\/span><\/a> Terra CEO Do Kwon has slung at critics on Twitter now ring with a hollow irony in the face of <\/span>severe liquidations<\/span><\/a> and a dollar-based stablecoin now 95 cents <\/span>below its peg<\/span><\/a>.\u00a0<\/span><\/p>\n Some saw it coming. In 2018, Cyrus Younessi, an analyst at crypto investment firm Scalar Capital, saw UST\u2019s white paper and immediately <\/span>warned<\/span><\/a> his boss. The algorithm pegging Kwon\u2019s stablecoin to the greenback, Younessi said, could one day fail and cause a \u201cdeath spiral\u201d if Terra\u2019s ecosystem was drained of capital too quickly.<\/span><\/p>\n Younessi wasn\u2019t alone. A small chorus in the industry warned of Terra\u2019s danger and instability, including <\/span>Charles Cascarilla<\/span><\/a>, CEO of stablecoin issuer Paxos, which publishes monthly <\/span>attestations<\/span><\/a> that its Paxos dollar is backed 1:1 with fiat reserves and debt instruments, and <\/span>Kevin Zhou<\/span><\/a>, co-founder of crypto trading fund Galois Capital.<\/span><\/p>\n Kwon, 30, dismissed their concerns with more trash talk.<\/span><\/p>\n But now, even Kwon has to concede that Younessi, Cascarilla, and Zhou were <\/span>right<\/span><\/a> all along. After all, he drove the <\/span>final nail<\/span><\/a> in UST\u2019s coffin himself.<\/span><\/p>\n Hubris is commonly thought of as excessive pride, although that\u2019s not how <\/span>Aristotle<\/span><\/a>\u00a0used it: \u201cHubris consists in doing and saying things that cause shame to the victim … simply for the pleasure of it. Young men and the rich are hubristic because they think they are better than other people.\u201d<\/span><\/p>\n Two millennia later, Aristotle may be a pile of bones, but his words paint a living portrait of Kwon, the CEO who not only believed he was too smart and too popular to fail, but who publicly <\/span>threatened<\/span><\/a>\u00a0competitors and confessed his joy in watching others fail.<\/span><\/p>\n Do Kwon: “95% are going to die [coins], but there’s also entertainment in watching companies die too” <\/p>\n 8 days ago. Ironic. pic.twitter.com\/fEQMZIyd9a<\/a><\/p>\n \u2014 Pedr🌐 (@EncryptedPedro) May 11, 2022<\/a><\/p>\n<\/blockquote>\n<\/div>\n His own failure has given the industry more than a lesson on how not<\/i> to create an algorithmic stablecoin: It\u2019s a sobering reminder of the cult of personality that enables people like Donald Trump and El Salvador President Nayib Bukele to silence critics with the <\/span>force of their ego<\/span><\/a>, not the soundness of their arguments.<\/span><\/p>\n Kwon\u2019s promise was up there with MAGA: He was going to make Terra \u201cthe largest decentralized money in crypto, <\/span>period<\/span><\/a>.\u201d As long as he gave his LUNAtics reasons to believe in him, aka profits, he didn\u2019t need to answer to anyone.<\/span><\/p>\n Then came May 9, 2022, when UST fell 20 cents below its peg.<\/span><\/p>\n <\/p>\n Terra\u2019s collapse brought to light how little we knew about Kwon beyond his <\/span>LinkedIn<\/span><\/a> and Twitter profiles. He graduated from Stanford in 2015 after studying computer science, and briefly worked at <\/span>Microsoft and Apple<\/span><\/a> before forming Terra.<\/span><\/p>\n Two days after UST\u2019s plummet began, CoinDesk allegedly <\/span>doxxed<\/span><\/a> Kwon as the \u201cRick\u201d\u2014a reference to half of the cartoon duo in \u201cRick and Morty\u201d\u2014behind another failed algorithmic stablecoin project called Basis Cash (BAC), which slipped its dollar peg for good early last year. BAC is now worth <\/span>a fraction of a penny<\/span><\/a>.<\/span><\/p>\n Still, Kwon appears steadfast. After two days of Twitter silence last week, he finally <\/span>took the heat<\/span><\/a> for UST\u2019s historic failure. What\u2019s more, he appears to have risen to the task of rebuilding Terra. On Monday, he proposed to fork LUNA\u2019s blockchain and rename the current chain <\/span>Terra Classic<\/span><\/a>, with the new chain wiped of UST.<\/span><\/p>\n <\/p>\n Kwon\u2019s proposal was met with near-unanimous <\/span>disapproval<\/span><\/a> in a preliminary vote on Terra\u2019s community forum. Many would prefer Kwon listen to Changpeng Zhao\u2019s <\/span>suggestion<\/span><\/a> to buy and burn most of LUNA\u2019s hyperinflated circulating supply of 6.5 trillion tokens. Kwon knows what the community wants, but he\u2019s <\/span>arguing against it<\/span><\/a>. This time, he\u2019s engaging in <\/span>critical and constructive<\/span><\/a> conversations with his critics, instead of just dismissing them outright.<\/span><\/p>\n He also has very real heat on him. All manner of <\/span>accusations<\/span><\/a> have been hurled at him by angry investors and restless Twitter users, including allegations of fraud and insider trading. Local Korean <\/span>sources<\/span><\/a> have said he may have evaded taxes, although this weekend he appeared to dismiss those rumors, saying he\u2019s fully <\/span>settled up<\/span><\/a> with the Korean government.<\/span><\/p>\n The crypto community will be sorting fact from FUD in the weeks\u2014months?\u2014to come, but Kwon isn\u2019t going anywhere, which means that, solvent or not, Terra remains on everyone\u2019s radar. Kwon\u2019s charming hubris and digital fool\u2019s gold may have been an intoxicating vision for his flatterers, but that tap ran dry, and the room has sobered up. At least for now.<\/span><\/p>\nThe hubris\u00a0<\/span><\/h2>\n
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The humbling<\/span><\/h2>\n
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