Binance CEO Shares Lessons Learned From Terra Fall, Says He is 'Pleased by the Crypto Industry Resilience'
Categories: Crypto News US
Addressing the historic fall of the Terra (LUNA) ecosystem, major crypto exchange Binance CEO Changpeng Zhao (CZ) said that he is "pleased by the resilience the crypto industry has shown." However, he also shared some lessons that the industry should learn from the Terra fallout.More precisely, in a recent blog post, CZ said there are "many lessons" to be learned from the Terra crash in terms of design flaws. In the first place, when an asset is pegged to another asset using the third asset as collateral, there will always be a chance of a peg failure - even if the asset is over collateralized by 10x. That is because the volatile nature of crypto makes it possible for a collateral asset to crash by more than 10x in a matter of hours. Moreover, there were also design issues with Terra's burn-and-mint mechanism, which allowed the stablecoin terraUSD (UST) holders to swap UST 1 for USD 1 worth of LUNA and the aggressive sell-off led to the supply of LUNA increasing exponentially.