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 The head of Binance is unhappy with the actions of the Terra team in the situation with LUNA and UST. Why?

Binance CEO Changpeng Zhao expressed his disappointment with the efforts of the Terraform Labs team to restore the parity of the stablecoin TerraUSD (UST) against the US dollar. Recall that this week the value of the coin began to fall sharply, and the stablecoin essentially ceased to fulfill its main function as the equivalent of the dollar. Together with UST , the price of the LUNA token associated with it collapsed catastrophically : it fell in price almost to zero. Let's talk about the situation in more detail.

Decoupling UST from the value of $1 is the main news of the week, which, among other things, led to an intensification of the collapse of the coin market. At the peak of the drawdown, the stablecoin rate dropped to 4 cents, although it should be valued at 25 times more. And if investors drained their coin holdings at the bottom, they suffered a serious financial loss.

Against the backdrop of what is happening, investors began to fear a repetition of a similar situation with USDT from Tether. However, as the representative of the project explained, their stablecoin is not algorithmic, but asset-backed. Accordingly, at least the same scenario is not terrible for him. Read more about this in a separate article .

Problems in the field of cryptocurrencies

According to the head of Binance, representatives of Terraform Labs were unable to provide the exchange with a clear report on their actions to restart the LUNA network. Here is his quote in which he shares his attitude to what is happening.

We asked their team to restore the network, burn the previously issued LUNAs, and return UST parity to the dollar. So far, we do not have any positive answer, and indeed there is no connection at all.

Zhao makes it clear that the timely burning of LUNA for the required amount could save the situation with UST - at least now this action seems more logical. However, the developers were in no hurry with an adequate solution. Moreover, the blockchain stopped several times, due to which users could not withdraw tokens from exchanges and at the same time lost faith in the project.

Changpeng Zhao compared the incident to the hacking of the blockchain game Axie Infinity, which happened in March 2022. To be more precise, they hacked the Ronin protocol, which is closely related to the Axie Infinity ecosystem. Then the hackers managed to steal about 622 million dollars. However, the project team reacted very quickly and did everything to minimize the damage. Zhao continues.

This is a strong contrast to the Axie Infinity incident where the development team took ownership, had a plan, and actively communicated with us. We helped them.

According to Decrypt sources , the Terra ecosystem consists of the native LUNA token and the UST stablecoin. UST is an algorithmic stablecoin driven by smart contracts, with LUNA acting as an arbitrage cushion to help UST maintain its dollar peg. Users can exchange LUNA for $1 UST and vice versa. If the price of UST rises above the anchor, traders can exchange LUNA for $1 UST and sell the newly issued UST for a profit.

That is, in fact, the developers were betting that the token users themselves would balance the situation. However, as a result, it was this component that failed and led to the current terrible consequences. For example, as we know, the famous rapper KSI lost millions of dollars on LUNA, although he bought coins after the collapse

This week, the divergence between the UST and the dollar has increased significantly, and the parity support algorithms have collapsed. The situation was aggravated by the fall of LUNA almost to zero. As a result of this, some crypto exchanges, including Binance, were forced to temporarily suspend trading in the token. Well, the Woo X trading platform completely delisted LUNA, that is, got rid of it and closed transactions. Obviously, for the safety of users, this decision was correct.

It should be noted that Binance, for its part, only suspended trading in LUNA and UST, which Changpeng Zhao confirmed on Twitter, citing concern for traders. However, trading was restarted three hours later. It is not clear how this fits in with the concern and desire to ensure the safety of investors.

We believe that the dissatisfaction with the actions of the Terra team is well deserved. Investors especially do not like the lack of transparent information about the actions of management with the reserves of bitcoins that they have been actively accumulating. Do these reserves exist - or have they already been sold? I want to believe that we will get an answer.

Will the Terraform Labs team be able to restore their image? Follow the development of the situation in our millionaires crypto chat . We discuss other events there, as well as admire fresh memes.