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The Collapse of Terra Luna


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Terra Luna (Image: Tracy Allen)

In 2018, Do Kwon and Daniel Shin founded Terraform Labs in response to a failed digital currency project. The lab came forth with Luna (LUNA), which was the token to be produced from the Terra blockchain and TerraUSD (UST) stablecoin later on in 2020. The UST was a stablecoin.


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Despite the skepticism from almost all over, funds kept flowing in to sums of more than $200 million in the period between 2018 and 2021. This by itself saw a lot of day traders hopping on the Luna train. This made the price of Luna rally from less than a dollar at the start of 2021 to highs of $119 in April 2022.

The year 2022, generally, began with a lot of charts being red — bearish in trend. Even though cryptocurrencies are volatile, the lows that were hit in 2022 were last seen in 2020 for some coins like Ether (ETH) and Bitcoin (BTC). This spelled doom to the cryptocurrency space as a whole and the Terra blockchain was no exception.

Well, this is still a mystery in speculation but if it is an attack, this is most probably how it went down;

After several tries to try and revive the Terra blockchain, Do Kwon decided that Terra is bigger than UST, according to his tweet. As a result, he opted to split the blockchain by using a hard fork. What happens in a hard fork is, two separate blockchains are formed, each working and existing independently of the other.

With the once ‘holy grail of decentralized finance’ coming down in shambles, it is crystal clear that a huge impact was felt not only on the Terra ecosystem but the crypto space at large. The confidence that had been placed in developments of its kind was as well not left behind, leaving investors much more cautious and shaky on such investments. To add to it, some were quick to lay judgment on Do Kwon terming him a fraudster.




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