The 30-year-old youth rocked the Bitcoin market with just one tweet, with a ‘terrible’ ambition for an unprecedented transcendent currency
Back in 2016, when Do Kwon was still just a little-known startup founder, but he had the ambition to bring free internet experiences to everyone. His researches are mainly focused on the distributed network related to Bitcoin and Ethereum digital currencies.
Fast-forwarding the footage to today, Do Kwon is one step closer to becoming the most influential person in the crypto world – a “whale” that has been at the heart of controversy.
Lunatics – a term referring to cryptocurrency advocates who have directed Kwon’s vision, from researching a purely stable digital currency that is easy to spend in real life, unrelated to Wall Street and the authorities managed, moved to one of the largest blockchain projects today. For those who don’t know, Lunatics also refers to the LUNA coin, which, through a number of algorithms, is designed to keep stablecoin Terra (UST) stable.
COMPREHENSION ON CURRENCY 1 USD
Many people think that Kwon will fail. They say a 20% interest rate seems “hard to come true” for a borrowing scheme on the Terra blockchain, and that the massive Ponzi scheme will eventually collapse. The prospect of the entire digital asset world being destroyed follows that with high probability.
However, despite the questioning and suspicious eyes, Do Kwon – the 30-year-old Lunatics king still surprised everyone. In mid-March 2022, a tweet by Do Kwon, co-founder and CEO of Terraform Labs, pushed Bitcoin’s price to its highest level after months of silence. He announced that he would buy 10 billion USD of Bitcoin to make a reserve for the stablecoin he is building – something that the history of cryptocurrency development has never been recorded before.
This event makes Do Kwon the biggest “whale” in the cryptocurrency market. Believers see this as a bold move that brings Kwon’s vision closer to reality. Skeptics say that this is just a “plot” to help a project that is running out of money away from speculation.
“Right now, my role in the crypto industry is a bit polarized,” Kwon told Bloomberg. “Because, you know, we’ve been making a lot of big strides.”
Kwon is known for his self-confident, sometimes confusing, tweets. The Lunatics king even raised his “middle finger”, figuratively of course, to the US Securities and Exchange Commission, claiming that it allows people to create and speculate on cryptocurrencies but not them. own them.
Because of that, it is not surprising that Kwon denies all allegations that Terra is just a conspiracy. Back in March, he also bet $11 million on blockchain with two social media critics to prove them wrong.
LUNA tattoo by Michael Novogratz
It is known that Terraform Labs is “backed” by large companies such as Coinbase Ventures, Galaxy Digital, Pantera Capital and many other “whales” in the cryptocurrency market. The Luna Foundation Guard, the organization that buys Bitcoin for Terra, also raised $1 billion in February through a private sale of LUNA tokens. The buying organizations can be mentioned as Jump Crypto, Three Arrows Capital, in which Michael Novogratz, billionaire Galaxy Digital, even tattooed LUNA on his arm to show respect and support.
“I am probably the only person in the world with both a Bitcoin tattoo and a LUNA tattoo,” Novogratz shared during the Bitcoin 2022 conference in Miami this past week.
The source of this excitement and also the reason why Terra is quickly becoming the second largest blockchain in Defi sounds quite “mundane” at first: the promise of a transcendent digital currency priced at 1 USD. Yes, exactly 1 USD, nothing more, nothing less. However, according to Bloomberg, in a volatile cryptocurrency world, this is not easy at all.
Terra’s ultimate goal is to create a reliable $1 USD stablecoin that is expected to bypass any government, bank, or any regulation. Currently, stablecoins are still mainly used by speculators. They see this as a “shelter” to avoid large risk fluctuations in the market. While traditional cryptocurrencies are usually only traded on Coinbase and FTX, and subject to the same rules as banks and brokerage firms, stablecoins are free to move, “in”, “out” DeFi platforms. It’s also much easier to speculate accordingly.
The two co-founders of Terraform
In fact, major stablecoin issuers, such as Tether and USDC, are also working to create a $1 coin by holding real-world dollar-denominated reserve assets. However, this requires the involvement of a bank or several centralized companies.
UST was born from there. It is known as an algorithmic stablecoin, with the aim of minimizing risk and away from non-crypto reserves. Instead, the UST will attempt to maintain the rate through correlation with a volatile virtual currency, in this case, LUNA. To put it simply, for each UST created, an equal amount of Lunas will be burned so that the UST will always remain at 1 USD.
According to Kwon, if the UST cannot be pegged to the USD, it is simply due to the explosive growth of DeFi projects on the Terra blockchain. And what’s worth mentioning here, is that Bitcoin can fix this.
Luna Foundation Guard (LFG) is currently planning to buy Bitcoin as a way to strengthen the UST. As more USTs are issued, a fee is used to purchase collateral. In theory, this allows Terra to realize its goal of a decentralized stablecoin.
Doubts and Speculation
Kevin Zhou, founder of hedge fund Galois Capital is one of the most skeptical of Kwon and the Terra community. On Galois’ Twitter account, a former head of an American cryptocurrency exchange named Kraken also describes his company as ancient Rome and Terra as Carthage – entities that were considered enemies of each other in history. history.
Almost daily, Galois tweets critical of Terra. He thinks the supply-demand imbalance between LUNA and UST will never be able to keep the stablecoin stable at $1, and that buying Bitcoin as a reserve asset is an indication that Kwon is worried. about a recession.
Also according to Galois, Terra’s annual percentage return (APY) on deposits, currently around 19.5%. Those same high yields, adjusted with Terra’s Anchor lending protocol, will eventually drain the reserves that support the project. Simply put, more money goes out than in.
“With each passing day, the Anchor reserve will flow out a few million like a clock counting down to the end of the world,” Galois wrote.
As proof, in the past 30 days alone, protocols like these have burned through over $100 million in reserves, according to Bloomberg.
“Did you know that a lot of major media companies have contacted me to comment on LUNA? I declined because I didn’t want to be a pawn in their anti-crypto story.”
Many anonymous Twitter accounts have also compared Kwon’s project to a Ponzi scheme – which is said to be quite common in the field of cryptocurrencies. In the past, Bitcoin has also been accused of being a genuine Ponzi, but 13 years on, the coin continues to thrive.
Because of that, Kwon expects demand for UST to also continue to increase.
“High interest rates on USTs are not a risk, as they will decrease as the project matures,” Kwon said. “I have great faith in a decentralized ecosystem, decentralized money. I believe Terra will be the biggest stablecoin in the next 2 years.”
It is known that outside of work time, Kwon spends all his time with his wife, who has just given birth to a baby girl named Luna. The life of a true “baby dad” leaves this Lunatics king with little time to play StarCraft, the space video game that has inspired major blockchain projects.
According to: Bloomberg
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