Current Events > Crypto already going back up?

(+) Yeah! (+)

DarkRoast, we know. The Terra blockchain is done. But on a different chain, there's a liquidity pool with tokens that were previously bridged over. Whatever transactions that happen on that chain is independent of the halted Terra chain because they do not need to post transactions to the Terra chain. So what people are doing here with that pool of tokens is gambling on a game of chicken, who would last be left with a bag of worthless tokens. Some people are hopeful that Terra would be revived, others are preying on that optimism. These are the motivations for people making buy orders and others filling those buy orders.

But Terra isn't the blockchain industry. And their flawed model was called out by other crypto folks ages ago. What makes Terra so dangerous is that they were attracting people completely new to the field who knew next to nothing about blockchain with their staking rewards of 20% APY. So people had no idea how the blockchain worked and relied purely on the trust and good faith of the Luna Foundation Guard. This is definitely inexcusable and a major blemish on the industry, but Terra isn't representative of what the industry offers that has industries all around the world researching and aiming to integrate and evolve their fields.

I told you this over and over, but you refuse to listen so I don't know why I bother to try.

Hey Sad_Face, given the incident that happened with Terra, would you recommend Proof of Work coins more than Terra since they may be less able to be manipulated?

Stuff like Bitcoin, Litecoin, Dash, ZCash etc.

Personally, I see value in Proof of Work systems. For the Bitcoin network, the cost is absolutely necessary because it aims to be a decentralized financial network. You don't want the US nor Chinese nor Russian nor whatever governments taking control to freeze transactions. Proof of Stake, it's too easy to take advantage of if your network is new and doesn't have a large and diversified community. There was a hack the other day, Beanstalk, where a hacker did a flash loan attack to borrow enough governance tokens to make a proposal to transfer the protocol's reserves to the hacker's wallet. The proposal passed since the hacker owned the majority of the governance tokens needed to pass it. This isn't to say PoW isn't susceptible to their own hacks, but it's just something that came to mind of the difficulty in kickstarting a PoS project.

That being said, the low costs means it's 100000x easier to build tools to manage PoS.

Bankless did a great talk pitting 2 experts between PoS and PoW models for an almost 2 hour debate.
https://www.youtube.com/watch?v=1m12zgJ42dI

But honestly, this wasn't really a debate of which model was better. It felt like the "debate" was a heated conversation of "Here's the economy that was derived as a consequence of the BTC's implementation of PoW" versus "Here are all tools we're developing for ETH 2.0 to make proof of stake fair for everyone".

I always have a preference towards PoW but the episode did open my eyes to how flexible the PoS model is so it's all about how you use it. But generally, I don't see many applications needing PoW.

That being said, if you're looking for investments, I'd be paying attention less to Layer 1 blockchains and more to tools developers are using to building innovations. but do note that I missed out on the bull run last year since I'm a filthy stinky chainlink holder.

[LFAQs-redacted-quote]


Okay thanks for the info, it's it possible that this Terra bug could have been done to the proof of work blockchains if they had implemented similar DeFi systems

Terra wasn't really a bug in as much as it was a pretty obvious flaw. The tldr is that Luna depended on UST being pegged to the dollar, but UST didn't actually have an underlying value backing, instead using "complex algorithms" which turned out to be releasing more Luna coins. The problem is that the more Luna coins you make, the less value they have, which also worsens UST's value. Ultimately it becomes a self-perpetuating death spiral.

They initially tried to peg UST with bitcoins but that didn't work, so they made more Luna.

DarkRoast posted...

Terra wasn't really a bug in as much as it was a pretty obvious flaw. The tldr is that Luna depended on UST being pegged to the dollar, but UST didn't actually have an underlying value backing, instead using "complex algorithms" which turned out to be releasing more Luna coins. The problem is that the more Luna coins you make, the less value they have, which also worsens UST's value. Ultimately it becomes a self-perpetuating death spiral.

They initially tried to peg UST with bitcoins but that didn't work, so they made more Luna.

Yah that's why I stay away from those "algorithmic" stable coins. I remember something similar happening on a small level with BDollar and BDO.

I guess Terra was the biggest System that this happened with.

Is Maker- DAI potentially subject to the same exploit?

In all fairness, this issue isn't exclusive to Crypto at all, but Crypto has a tendency to foster nearly cult-like followings for individual coins, and it often results in investors refusing to listen to reason. Nobody with an actual, solid understanding of how Terra Luna and UST worked would've advocated for it. It was clearly going to fail at some point, because the very idea of being backed by another coin that itself is backed by your coin is ludicrous no matter how you try to make the math work.

Luna's value is "stable" because UST is "stable." But UST's "stability" requires Luna being stable. It's such a wildly unstable foundation. As had been predicted by smarter investors, the moment UST de-pegs from the dollar, Luna undergoes massive coin inflation, resulting in quick devaluation, resulting in UST de-pegging further, resulting in even faster Luna inflation. In the end, it all boils down to assuming UST will never de-peg. And that was a real bad assumption to make.

That said, it would be an absolutely brilliant shorting opportunity if you knew what you were doing.

HroHybridCards posted...

Also, going back to NFTs, most people who don't know that much about NFTs picture dumb jpegs when they hear "NFT." But NFTs are a lot more than that. It's actually the underlying tech/smart contracts that are a big deal. For example, NFT smart contracts could make real estate agents/brokers obsolete some day:

https://youtu.be/aYPiE3IsPIc

Instead of buying a house, you could instead by "shares" that house by buying fractionalized NFTs for that house. For example, instead of spending $500k to buy a house, maybe you spend $100k to buy 1/5th of that house's NFTs. You now own 1/5th of that house. Every time whoever lives in that house makes a rent or mortgage payment, you get 1/5th of the profits. Etc. That's just one example of what NFT smart contracts can be used for.

This is all speculative for now, but the underlying tech/smart contracts are what is getting people hyped about NFTs and web 3.0.

We all have portions of fractions of houses? Sounds dumb.

2Pacavelli posted...

Is Maker- DAI potentially subject to the same exploit?

DAI's protocol is overcollateralized. And interestingly enough, I found out recently that algorithmic stablecoins have never succeeded. Makes you wonder how Terra got VC funding in the first place.

Al Kahn explaining his life story leading up to VeVe according to what VeVe people are saying on YouTube and Twitter. I'm still watching it now:

https://youtu.be/rka6f6V8RDc

https://youtu.be/I8TZ4ucWz8Q