Binance CEO Pens Down Critical Points Regarding Terra Ecosystem Collapse

$500M Funding Secured by Binance For Investment in Blockchain and Web3 Sector
  • LUNA team was unable to create enough “revenue” to keep it going.
  • The incentives utilized to attract new investors were not sufficient to keep pace.

Following the recent Terra ecosystem collapse, Changpeng Zhao, the CEO of Binance, has continued to express his thoughts on the matter. According to a recent blog post by CZ, his primary goal is to safeguard Terra users while also emphasizing that any option to get Terra running again had certain drawbacks.

The initial fault in the LUNA system’s architecture, CZ wrote after Terra’s catastrophic failure, was its ability to create an infinite amount of new tokens. According to his perspective, while printing money does not generate value, it dilutes current holders.

Restoration Started Too Late

He went on to say that although Anchor’s fixed incentive of 20% was utilized to encourage expansion, the LUNA team was unable to create enough “revenue” to keep it going.

CZ also noted a developing ecosystem with use cases; however, the incentives utilized to attract new investors were not sufficient to keep pace with the ecosystem’s growth. He called this increase “hollow” and encouraged investors to “don’t just chase high APY. Look at fundamentals.”

According to the CEO of Binance, the Terra team moved too late to restore the UST peg. When the depeg was at 5%, they might have avoided the crisis, he said, by using their Bitcoin reserve. Instead, they waited until nearly $80 billion had been wiped off the market before attempting to restore the balance with $3 billion.

According to him, a lack of open connection with its community damaged investors’ confidence in Terra. Also, Changpeng Zhao has “mixed feelings about the revival plans provided by the Terra team.” For the most part, the crypto industry was shaken by Terra’s meltdown, as seen by the early depeg of USDT and a 20 percent drop in the value of Bitcoin.

An engineering graduate who is passionate about writing and loves the very existence of crypto. Trading forex currency keeps me busy when I am not writing and analysing the crypto world.