Describing the Terra LUNA ecosystem as a shallow concept, Binance CEO Changpeng Zhao on Friday further spoke about the crash. He said there are ‘no great solutions’ that can please everyone who were affected by the meltdown.
CZ said Terra’s growth was hollow and that led to the bubble burst. He indicated that the collapse was avoidable had there been a quicker response.
The Binance CEO termed Terra’s design flaw ‘most stupid’ over the theory that minting more of an asset would increase its market cap. Printing money does not create value, it just dilutes existing holders, he added. “Exponentially minting LUNA made the problem a lot worse.”
Terra Crash Was Avoidable
“While Terra did have an ecosystem with some use cases, the speed of growth of the ecosystem did not match the speed of the incentives used to attract new users. The entire incident may have been avoided if the Terra team had used their reserves when the de-peg was at 5%.”
He said the Terra team was slow in using their reserves to restore the peg. They tried to use $3 billion to do the rescue after the value of the coins had already crashed by 99%, he stated.
‘Resilient Crypto Ecosystem’
CZ said he was pleased by resilience shown by the crypto industry. He said the resilience was a key differentiator generally not understood people who are used to centralized systems.
“In a decentralized system, all the stablecoins work in different ways. There are no common standards or reserves. However, when one fails, the others are less affected. Even without bailouts, all other major stablecoins withstood the shock, and most other crypto projects are fine.”
Speaking about the impact of the crash, he said there were shockwaves sent throughout the entire crypto ecosystem. Many crypto projects were and are still negatively impacted in many ways, he said.