How Terra collapse nearly killed algorithmic stablecoins
The Terra-Luna Ponzi scheme grew to an incredible size, with the TerraUSD algorithmic stablecoin reaching a mind-boggling $40 billion and the Luna governance token growing to a market capitalization of $40 billion. This growth was subsidized by Terraform Labs paying an unsustainable lending rate through the Anchor protocol. Then the music stopped. The value evaporated and the subsequent collapse of Terra-Luna had a devastating effect on the wider crypto ecosystem, destroying trading firms, exchanges, and lending platforms. However, Terra was far from the sole algorithmic stablecoin, and its spectacular collapse caused a ripple effect that was felt by many of its competitors. Some have pivoted, finding alternative designs with more collateral, but most have failed to see adoption in the industry. Here we take a look at the current state of some of the better-known projects impacted by Terra’s spectacular demise. At its peak, TerraUSD’s market cap reached a mind-boggl...