The episode highlights how even cryptocurrency protocols intended to avoid the wild volatility of tokens like bitcoin have endured can end up with the same, if not worse, swings in value.
It is unclear exactly why the UST began to fall; a leading theory is that it was sold off massively by a short seller, causing a tailspin. What is clear is that there has been a global cryptocurrency rout, with some tokens down 50% in recent months, making it easier for investors to lose faith in a project like UST and throw away their chips.
Josh Reyes, co-founder of a competing Australian crypto firm called Minke that offers alternatives to Anchor with different designs, said UST’s failure was predictable. He believes that Anchor also offered an unsustainable high yield of around 20% in an effort to grow so large that it would achieve market dominance. Other decentralized finance projects, which are like code-governed digital banks, offer a demand-based return for the tokens they lend.
“We always knew it wasn’t sustainable,” Reyes says of Anchor. “It will leave a black mark on the entire industry.”
Rachamim and Bilotta, two of Tiiik’s founders, aren’t keen to speculate on what went wrong with UST. It was always meant to be just one of the many options available to Tiiik, Rachamim says. The company will now take some time to figure out which protocols it will offer next and its founders say the industry will play a key role in the future of finance.
“It’s going to take months, we want to get it right,” says Bilotta.
Asked about a blog post written by Reyes criticizing UST and Luna without mentioning Tiiik, Bilotta says he doesn’t believe he’s referring to his company. “I am a builder,” he says. “I don’t have time for gossip.”
For his part, Reyes says the industry should be regulated.
“A lot of ordinary people have been completely destroyed,” he says of the broader collapse of UST and Luna.
“I hope [the regulators] come out with a scalpel rather than a hammer, because some of us actually make a big impact and get it right.
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