The Terra-Luna Ponzi scheme grew to incredible size, the TerraUSD algorithmic stablecoin reached a mind-boggling $40 billion, and the Luna governance token grew to a market cap of $40 billion.
This growth was subsidized by Terraform Labs paying unsustainable loan interest rates through the Anchor Protocol.
Then the music stopped. The value evaporated and the subsequent collapse of Terra-Luna had a devastating impact on the broader cryptocurrency ecosystem, destroying trading companies, exchanges, and lending platforms.
But Terra is far from the only algorithmic stablecoin, and its spectacular collapse caused ramifications that were felt by many of its competitors. While some companies pivoted and found alternative designs with more collateral, most were not adopted by the industry.
Here’s a look at the current status of some of the well-known projects affected by Terra’s spectacular demise.
At its peak, TerraUSD’s market capitalization reached a mind-boggling $40 billion.
Terra
Terra still exists as “TerraClassic” and doesn’t seem all that different from before the collapse.
This system maintains much of the design of the original Terra-Luna system, but without the subsidized yields of Anchor.
The asset has completely failed to maintain its peg and is currently trading for less than 3 cents, making it no longer a stablecoin in any meaningful term. The company’s market capitalization is about $130 million, a fraction of its previous value of nearly $20 billion.
Its corresponding governance token, Luna Classic, has a market capitalization of about $500 million, just a fraction of its former $40 billion, according to data from CoinMarketCap.
US dollar
USDD is a TRON native algorithm stablecoin that was announced before the collapse of Terra-Luna. It aimed to replicate much of Terra-Luna’s model, but with financing rates about 30% higher.
USDD was scheduled to be integrated into the core of TRON, similar to Luna, by November 2022, but this was not achieved before Terra failed. This has since been abandoned as one of the project’s goals.
In many ways, USDD has abandoned almost all the trappings of an algorithmic stablecoin and instead became a stablecoin backed by “burned” TRX tokens and a few other assets. A significant portion of its reserves are stored in HTX, which is recommended by Sun.
Read more: Justin Sun’s USDD removes 12,000 BTC without DAO approval
Nominally, there is a Decentralized Autonomous Organization (DAO) that manages this protocol. However, this appears to be fiction, and the actual control over this project is much more centralized.
Only one vote is displayed on the governance page. This allowed burned TRX to be deployed by USDD, making it unclear whether the DAO knew “what burning was.”
There are no votes for other important decisions, such as major changes in protocol direction, decisions to hold reserves in HTX, or major changes to the stablecoin’s reserve composition.
In a recent example, the stablecoin removed 12,000 Bitcoins from its reserves without a corresponding vote.
According to data from CoinMarketCap, the coin’s market capitalization has remained remarkably stable since its launch, holding around $700 million.
Cero/Mento
Celo is currently a Level 2 solution on Ethereum. When launched, it was a layer 1 that closely mimicked the way Terra worked using algorithmic stablecoins that were exchangeable with corresponding governance tokens.
This functionality was then spun out to Mento, and instead of deriving value from convertibility into Celo Gold, it maintains its value through overcollateralization of the Mento Reserve, which includes assets such as CELO, sDAI, USDC, ETH, BTC, etc. .
The USD-pegged versions of these stablecoins have a market capitalization of about $26.5 million, down from a peak of about $120 million, according to data from CoinMarketCap.
flux
Frax is a dollar-pegged stablecoin that was launched as partially collateralized. However, in version 3.0, it is primarily intended to be fully collateralized by cryptocurrencies.
Currently, the majority of the collateral for this coin is FRAX, which is staked and held directly.
The token has a market capitalization of about $640 million, down from its peak of about $2.9 billion, according to CoinMarketCap data.
Read more: How to file a lost Terra Luna or Anchor claim
conclusion
Many projects that once hoped to emulate Terra’s phenomenal success were forced to pivot as the effects of its failure rippled through the ecosystem.
Few of these projects have seen new adoption since Terra’s failure, with more attention seemingly focused on designing alternative stablecoins like Ethena’s eUSD.
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