We note that the situation with the Terra ecosystem is not getting any better. What's more, within the blockchain community, talk has also begun about the prospect of a trial for project founder Do Kwon. In short, it will not be easy to prove the developers' evil intentions even if they exist. However, given the current activity of law enforcement agencies, we can assume that there will still be problems for the project's management.

What happened to Terra

Ardoino expressed his opinion on the Reimagine Unplugged podcast. Here’s one of his quotes published by the Cointelegraph news outlet.

I don’t know Do Kwon. He created this project with arrogance and the idea that he was right and many people supported him. Of course, for economic reasons, the latter is indeed a fact. But Terra itself was not a fraudulent scheme, it was a poorly designed project.

Here’s a recording of a podcast in which this viewpoint was voiced, among others. We recommend watching it if you want to understand more about what’s going on in the cryptocurrency world and have a good ear for the English language.

According to Ardoino, the UST became too big to maintain a peg to the dollar as its collateral, which consisted mainly of reserves in Bitcoin, was insufficient for parity. The expert continues.

They essentially found themselves in a cascading liquidation situation where they needed to protect parity. So they were forced to sell collateral, and selling collateral caused an additional collapse in the market. All this only made things worse.

In other words, the developers were held hostage to the situation created. Still, with Bitcoin and the market collapsing in general, which was provoked, among other things, by Luna Foundation Guard's dumping of billions of dollars worth of huge crypto reserves, LUNA was hardly supposed to grow. So instead of fixing what was happening, it was actually getting worse.

Tether technical director Paolo Ardoino

To prevent situations like this from happening again, financial regulators and governments need to do a good job on schemes to regulate the crypto market. And, first of all, they should distinguish between the concepts of different types of stablcoins, Ardoino believes.

I think the first thing that needs to happen is a proper categorisation of stabelcoins. Right now UST is an algorithmic stablcoin and Tether is a centralised stablcoin. They are two different “beasts” with two different guarantees, two different security methods and so on.

The collapse of UST parity to the dollar

Earlier, Tether reported a 17 per cent drop in commercial paper reserves securing its USDT stablocoin in the first quarter. In addition, the stablcoin was “fully collateralised” with $82 billion in reserves as part of legally required reporting as a result of a settlement with the New York Attorney General’s office.

Note that this is not the first time a Tether spokesperson has commented on the topic of the collapse of LUNA and UST. Initially, it came amid fears of the blockchain community, which was expecting a similar collapse of USDT. However, at that time Paolo Ardoino clearly explained the difference between UST and USDT and clearly explained why a similar scenario for the world's most popular stack in the form of Tether product is simply impossible. You can read more of his version at the link.

Bitcoin and fiat currencies


We think Paolo Ardoino's version may indeed be true. After all, Terra existed long enough and got financing from the most famous representatives of the industry, like Binance, which means that the developers had access to money. With that in mind, an unplanned collapse does look possible.