How Terra developers could have saved the project. Binance’s head opinion

Changpeng Zhao believes that the team should have used reserves when the UST stablecoin rate deviated from the dollar by 5%

22.05.2022 - 07:30

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2 min

What’s new? The CEO of cryptocurrency exchange Binance, Changpeng Zhao, said that the collapse of the Terra ecosystem could have been avoided. According to him, the project team needed to use its reserves to do so when the UST stablecoin rate deviated from the US dollar by 5%. Zhao noted that when the value of the coins had already fallen by 99%, the company tried to use $3 billion to restore the peg, but it no longer worked. The head of Binance disclosed this in a blog.

Information on the Binance blog

What else does Zhao say? Zhao also pointed out that the Terra team did not communicate with the network’s community very often or actively. In this, no solutions have yet been found to satisfy everyone affected by the rate collapse of UST and its backing token LUNA. The head of Binance noted that the exponential issuance of LUNA has not contributed to market capitalization and creation of value, but has only exacerbated the problem. However, he does not believe that the consequence of the incident was a scam scheme at the heart of the project:

“In this case, it didn’t look like a scam. It was just (sorry for the lack of a more polite word) stupid.”

According to Zhao, the consequences of Terra’s collapse continue to be felt by many other projects throughout the crypto ecosystem.

What events happened before? On May 17, cryptocurrency exchange Binance offered projects built on the Terra blockchain to migrate to the BNB Chain. As part of the transition to BNB, project teams would receive priority access to tech support, advertising, business and token development. Polygon and Juno Network made similar offers to the developers of projects on Terra.

Changpeng Zhao also reported that Binance lost more than $1,6 billion in unrealized profits from its investment in the Terra (LUNA) token following its rate collapse. In this, Zhao urged the Terra team to focus on compensating retail investors. Ethereum co-founder Vitalik Buterin made the same recommendation.

For more details on how the Terra ecosystem collapsed, see GetBlock Magazine’s article.

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