Which is what I like most about that ecosystem, just do it, accept the consequences, rapidly iterate to something more resilient

How is this not just the exact same formula? "Oh you see it's stable because there's this exchange mechanism and it's attached to this floating currency, blah blah blah." It all sounds very complex but then it breaks and you look underneath and it seems like anyone who understood what the mechanics actually were would've always been a little sketched out by it. Is this whole ecosystem not just small-time hobbyists and programmers trying to create this exact dangerous dynamic over and over?

It seems like you cannot trade Luna directly on coinbase. But there's a "WLUNA" (wrapped luna) that alleges to trade like Luna over the Ethereium blockchain. https://pro.coinbase.com/trade/WLUNA-USD

I'm not sure how any of this works. I recognize that the "algorithmic stablecoin" basically sells LUNA to prop up UST (and vice versa, when UST goes over $1, then UST is sold to prop up LUNA). But I thought that the whole TITAN / IRON thing from a few months ago proved that this structure was vulnerable?

Did UST / LUNA just end up making the same mistakes as TITAN / IRON? Why is this article discussing "BTC reserves" ?? Why would they be selling BTC to prop up UST? What mechanism exists there?

All of these cryptocoins have their own rules, and those rules will determine the failure case. I know how much I don't know. But at the end of the day, a $0.90 "stablecoin" is not a good look.

EDIT: Wait, its now $0.78 ?? https://pro.coinbase.com/trade/UST-USD

Erm... that's not good.

It's quite the neat idea really -- but I suppose it hinges on people believing that there is a healthy UST-LUNA ecosystem tomorrow that you can use to withdraw your funds if you want. Burning UST to get LUNA doesn't make sense if LUNA loses enough value by the time you could exchange it for something else, so I assume people rather take the loss on selling UST for less than $1, which would explain what we're seeing: Right now UST is at $0.81 and LUNA is down 47% in the last 24h. We'll see if the system is robust enough to recover from a 'bank run', if you can call it that. It at least isn't the first time the peg has been broken, and so far it's stabilized at $1 again every time.

This thing isn't just one token, but apparently at least three. One of them (Anchor) claims a 20% yield on savings. This alone should be a red flag because that's about 1900 basis points above what you can expect to get from a good savings account or short-term treasury.

I don't have time to dive into the Rube Goldberg machine that this thing appears to be, but when it ends, it will end very badly.

Every Bitcoin era seems to have its Ponzi scheme. In 2017 it was BitConnect. They offered something very similar to what Anchor appears to be offering.

Most people have no understanding of the hidden leverage built up in the system and how a small margin call in a negative sentiment env could easily trigger a 80-90% draw down.

You should have cashed out/been buying high quality real estate for the past 6-8 months but if you haven't been doing that, it's still not too late to get out.

There's a certain delight [1] in watching increased market volatility exposing how understanding merkle trees and consensus protocols doesn't make you an expert on what the financial system is, how it works and why it is the way it is.

So lots of countries have tried pegging their currencies to other currencies, most commonly the US dollar. Your ability to do so is limited by how much money you are prepared to throw at it to counterbalance market forces. I mean this is one reason why we moved from Bretton-Woods to floating exchange rates.

Central banks have far more ability to defend a peg. Still a pet can be attacked (eg [2]) if the peg is sufficiently out of line with the market.

It's going to be funny to watch these crypto trainwrecks learn these lessons (again) the hard way.

[1]: https://www.youtube.com/watch?v=nCQGQ5qBQTA

[2]: https://www.investopedia.com/ask/answers/08/george-soros-ban...

    Top 10 Holders: 56.6%
    Top 20 Holders: 67.05%
    Top 50 Holders: 82.17%

Do Kwon was putting a lot of weight behind a stablecoin liquidity pool designed to cut out DAI, crv-4pool. Those who invested in the crv-4pool are left with lots and lots of UST and very little of the other FRAX, USDT or USDC.

https://curve.fi/4pool (Ethereum RPC wallet required to see stats) USDC: 300,086.92 (4.73%) USDT: 302,375.01 (4.76%) UST: 5,443,729.24 (85.77%) FRAX: 300,405.16 (4.73%)

I ask this because:

- you can't actually shop in your supermarket using stablecoins

- there is more risk to them than holding USD

- there is no increase in privacy because blockchains are public ledgers

- it's not bankless because the stablecoin issuer is effectively a (poor) bank

- it doesn't bypass KYC or AML because a regulator can decide that stablecoins are effectively currency. Also, Bitfinex requires their KYC forms to be filled out before you can withdraw stablecoins, making them no better than fiat, at least within the context of that exchange. If other crypto exchanges are like this, then you are better off converting to fiat every single time.

From discussions with people, this appears to be a weird dance that means regulators can't regulate, for some reason.

A. Day trading speculation; Tax evasion; Money laundering

This seems explanatory... apparently, what I was missing is that they just don't.

The reason that proof of work is absolutely necessary for both decentralization and scarcity is because the only objective source of truth available from meatspace is raw computation. Nothing else is trustlessly verifiable in cyberspace other than computation.

"I accept that I have lost all of our users a lot of money, soz". There's a lot of vulnerable people losing a lot of money on crypto, I've yet to see how any of this is good for society.

Is it? Specifically, what's the equivalent of "credit ratings that were essentially fraudulent"? If you read the smart contract code, misunderstood how it worked, proceeded to invest anyways, and then it blew up, that sounds like something that's on you. If you invested in some opaque financial product (I don't think MBS buyers can go through each mortgage with a fine toothed comb) and the independent third party that's supposed to be evaluating it was actually biased, that's at least partially on the seller and/or third party.

$0.72 on Coinbase.

But to be fair, the last 5 minutes have been brutal...

It will be interesting where, if, or how.

The SEC attempted to establish jurisdiction over Do Kwon and Terraform Labs late last year but failed spectacularly.

20% is risk parity for keeping your money in smart contracts

Not all stable coins are the same, this one is so shady it’s even named to confuse investors.

I think it's actually a much more interesting formula because

(1) this stuff was invented out of whole cloth - concepts like MEV bots, hoping normies don't notice the rugpulls in progress, inventing stablecoins, staking, and establishing borrow rates are all unique to decentralized finance and involve strangers paying money in order to be entertained and maybe earn some of other strangers' money

(2) even though it was built entirely from scratch, the concepts and language end up looking EXACTLY like some of the synthetic constructs we see in "traditional finance", which I thought were actually based on something of real value

So -- watching my Twitter feed with the contributions from the smart folks I know from college who have gone into fulfilling careers as cryptocurrency VCs and founders has been fascinating overall. It's made me question how firmly I understand the value of "real things".

Note that I do kind of gloss over the "multiple slurp juices on one ape" stuff and questions about whether art has value. Much more interesting to me is the technical jargon that surrounds this communal hallucination that the bits on the blockchain represent amounts of money and that finance concepts can meaningfully be applied to them.

If everyone has mutually consented to moving around money this way in DeFi and it's working out ok (i.e. everyone is simultaneously giving each other a sly wink about the foundations but we're all having fun and it's fine), does the whole rest of modern finance also work the same way? What is the difference between cosplaying doing technical analysis on the blockchain and doing the other kind with stocks, options, futures, and commodities?

Not that I think this is what’s happened, it just stood out that the grand claims didn’t even have any fine print, you had to go actually ask the community, “hey um what about this apparent contradiction?”

To their credit the community was super nice and helpful.

[0]: I cite him as the world’s (former?) greatest currency speculator, not for his politics.

2. You want "a stable value" but don't really want to hold USD (because to hold USD, you need access to the US capital markets and banking system).

Bulgaria pegged it's currency to the Euro for more than a decade now. And the peg is solid. There are a few more countries with solid pegs - Denmark, Hong Kong.

https://www.youtube.com/watch?v=vabXXkZjKiw

Not all stablecoins are created equal.

Of course, if you're going to use it, you'd better understand the system behind it. There's a DAO called MakerDAO that maintains a pegged stablecoin called DAI that is pegged to USD using actual crypto reserves. It works very, very well. Of course, given time, all pegs break. But it's miles ahead of this Terra system that was an obvious sham from the get go.

Really crappy advice at the height of a bubble and considering the likelihood of a major recession.

It's the same problem for basically any stablecoin: they exist because the paths between traditional finance and crypto are narrow and tricky. But this in turn limits the ability of a stablecoin to actually peg to a value from traditional finance. If there are mass net outflows from the cryptocurrency ecosystem back into traditional finance it will be impossible for these stablecoins to maintain their value. They are essentially a bet on the downside of crypto (if everything goes to custard you won't be able to exit) with none of the upside of crazy returns found in non-stablecoin cryptocurrencies.