Paolo Ardoino, the chief technology officer of Tether (USDT) and its parent company Bitfinex on the Reimagine Unplugged podcast this week, stated that the recently crashed LUNA project was not intended to be a rug pull but rather poorly designed.
Ardoino compared Terra’s algorithmic stable coin TerraUSD (UST) to a “castle of cards” that was meant to collapse at any time in response to the recent crash of the Terra ecosystem projects.
Following the last week’s LUNA/UST crash that shocked the whole crypto industry as Terra was one of the top five cryptocurrencies with a market cap of $40 billion two weeks ago.
Many in the cryptocurrency community have raised concerns over questionable comments and actions from the infamous Terraform Labs founder, Do Kwon.
The tension and concerns in the crypto industry were further amplified by the revelation of Kwon as one of the two co-founders of a failed algorithmic stable coin project dubbed “Basis Cash” that preceded LUNA. The token was shut down in 2018 due to regulatory concerns about the security of its Bond and Share tokens.
Speaking on the LUNA crash, Ardoino stated that Kwon’s overconfidence and his misguided sense of belief was another major factor in Terra’s demise:
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.
In addition, Ardoino noted that UST was akin to a castle of cards that could fall and waved it off as a bad idea. He stated he couldn’t speak on it as it would have caused it to crash faster than it did recently.
Additionally, the Chief Technology Officer explained that UST had become too big to maintain its $1 peg as its collateral, which was mainly was BTC, was not enough to support its stablecoin but was large enough to crash the crypto market further.
“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,” he said.
