Security Concerns Prompt Cancellation of Terra Dapp Expo
Organizers of the Terra Dapp Expo have decided to cancel the upcoming convention that was meant to take place in June 2022 in Austin, Texas.
LUNA fans (dubbed “LUNAtics”) earnestly hoping to present their Terra decentralized applications in Austin, Texas next month will have to wait as security concerns surfaced following the de-pegging of the Terra stablecoin. According to the event’s Twitter account, “…there have been serious threats made from some understandably upset individuals who’ve lost everything in the crash & we don’t want to risk anyone’s health/life,” referring to investors losing billions of dollars following the crash of TerraUSD (UST), and its sister coin, Luna (LUNA).
Terra’s price dropped from one dollar to mere pennies as mechanisms designed to prevent collapse failed. Multiple large withdrawals from Anchor Protocol, where lenders deposit virtual currency to earn interest, caused the Terra to de-peg from the dollar, prompting more investors to withdraw their funds and sell the coin, resulting in a downward spiral in price. “Once liquidity evaporated, this perpetuated the collapse of the stablecoin,” Clara Medalie told Bloomberg. UST’s creator, Do Kwon, commenced talks with Alameda Research, Galaxy, Jane Street, and Jump Crypto to raise $1.5B to restore Terra’s liquidity.
‘We feel your pain’
“Much like the majority of the #LUNAtics community, we as a validator AND as individual members of the tram have ll incurred massive losses – So do know, we feel your pain and are still here to offer our service and support,” organizers of the expo went on to say. They further added that discussions would take place on Discord and Twitter Spaces in the coming days to address queries.
As more withdrawals depleted over $12B in Terra, the Luna Foundation Guard, a nonprofit designed to back up Anchor reserves, exhausted as the bank sold its bitcoin holdings, driving the price of bitcoin lower this week, sending shockwaves through the broader cryptocurrency market.
How do stablecoins work
The rationale behind stablecoins like Luna and its sister coin Terra is that they enable purchases of other cryptocurrencies like bitcoin without using the traditional financial system, where a bitcoin purchase could take a few days to clear. Stablecoins are pegged to fiat, or government-issued money, making them more stable than currencies like bitcoin and Ethereum. To maintain their peg to a fiat currency, stablecoin issuers can choose to hold reserves of cash and short-term U.S. government securities or to use software to facilitate arbitrage between two native tokens, with each restoring the other like in Terra’s case. UST and LUNA can be swapped for each other to maintain their pegs.
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