The crash of the Terra algorithmic stablecoin, UST, is still being felt across the market. The fall of the token caused massive losses, especially for the investors that had staked the stablecoin, and they could not withdraw despite the stablecoin spiralling in value.
However, while most retail investors who bought the token suffered losses, some of the largest investment firms had already cashed out before the token came tumbling down.
Polkadot founder asks people to pay attention
The failure of the LUNA token and the UST stablecoin has presented several lessons for the crypto community. According to the founder of Polkadot, Gavin Wood, people need to pay more attention to developments in the crypto market to ensure they do not fall victim to such events again.
Wood was speaking during the World Economic Forum in the Swiss Alpine Resort of Davis, where he said they needed to research more about the underlying value offered by a currency before investing in it.
“I would hope that people pay more attention to what is belying the currency name when they get involved in a community, ecosystem, economy,” Wood said. During the interview, Wood added that the internet did not provide the real legal nature of investments because the legality of assets was “something that is determined by sovereign nations.”
He also added that people needed to use technology for good despite exposing them to make mistakes. “Technology cannot prevent people from making mistakes but can help those who want to understand better the facts of the world, and what they’re buying,” he added.
The crash of LUNA has caused ripple effects across the cryptocurrency sector. Following the collapse, many cryptocurrencies also declined in value. However, projects are still maintaining their development focus, and they are still joining forums discussing blockchain technologies and other developments in the space.
The Web3 concept is becoming increasingly popular, and brands, especially those in the finance industry, are showing interest in the sector. However, the crash of the UST stablecoin has created concern among regulators that are now looking for more regulatory clarity on stablecoins, as they are deemed safe assets.
The collapse of the UST stablecoin has also attracted the attention of some of the leading global organizations. The Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, talked about the UST stablecoin, saying that stablecoins that are not backed by any assets are pyramid schemes.
Georgieva was speaking at a WEF panel discussion, saying,
When we look at stablecoins, this is the area where the big mess happened. If a stablecoin is backed with assets, one to one, it is stable. When it is not backed with assets, but it is promised to deliver 20% return, it’s a pyramid.
Luna 2.0 is launching soon
Terraform Labs has said it will be releasing a new blockchain known as Luna 2.0. This genesis chain will have different features from the original blockchain. The launch of this new chain will happen after the proposal tabled by Do Kwon for the same was passed through a governance vote.
Luna 2.0 will be unveiled on May 27. The launch of this new chain follows a series of proposals that have been tabled by the Terra team talking about ways to revive the blockchain. One of the proposals will involve remaining the old Terra chain into Terra Classic (LUNC) and creating a new blockchain named LUNA. After getting support from 65.5% of the total votes, the proposal has passed.
“Terra governance Proposal No 1623 to rename the existing network Terra Classic (LUNC) and rebirth a new Terra blockchain (LUNA) has officially passed!” the Terra team said.
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