Terra / LUNA
CollapsedStablecoin · $UST · born 2018 · ✝ 2022
An algorithmic dollar that couldn't hold a dollar.
Terra's UST was an algorithmic stablecoin backed by its sister token LUNA. A bank-run-style death spiral wiped out ~$60B in days.
- Peak
- $60B ecosystem
- Cause
- Collapsed
- Year of death
- 2022
☠️ Cause of death
The mint/burn peg mechanism had no exogenous collateral. When confidence cracked, UST and LUNA fed each other into hyperinflation.
📓 Lessons left behind
- —Reflexive collateral is not collateral.
- —20% 'risk-free' yield (Anchor) is a subsidy, not a business.
- —Pegs survive on liquidity during panic, not math during calm.
🌱 The idea that survived
Overcollateralized stablecoins
Fully-backed and overcollateralized designs (USDC, DAI) became the default after the algorithmic experiment burned down.
#depeg#algostable#death-spiral