According to Tether (USDT) and Paolo Ardoino, Bitfinex chief technology officer, the Terra (LUNA) project was not actually created for a rug pull, instead it is one that is of a poor design.
While talking about the Terra ecosystem’s drastic market crash, Paolo Ardoino compares the TerraUSD (UST), algorithmic stablecoin with a castle of cards that might fall anytime.
In the crypto space many have made doubtful comments about the Terraform Labs founder Do Kwon which has raised questions about his actions. As per the reports, the founder Do Kwon had also worked on an algo-stablecoin project which was dubbed Basis cash, but the project failed.
These comments by Ardoino were made during his presence at Reimagined Unplugged podcast this week, which was conducted by Reimagine, a media company that is completely focused on Web3 content and events. According to Ardoino, the main issue was with Kwon’s misguided sense of belief.
Further Ardoino went on to state that it was difficult for UST to maintain its peg against dollar as its collateralization was primarily with bitcoin when UST was attempting to build its reserves, but this wasn’t enough to support the stablecoin instead was enough to crash the market.
He also added that “They were basically in a cascade situation where they had to defend the peg so they had 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.”
Moving on, when the Bitfenix CEO was asked about how would the regulatory landscape for stablecoins look like, Ardoino stated that it’s always the policymakers who needs to first clearly state the difference between stablecoins that are fully backed by the assets which are opposed by the primarily backed by algorithms.
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Source: https://coinpedia.org/news/prominent-influencers-of-crypto-space-calls-terra-ust-a-castle-of-cards-heres-why/