Twitter handle: @jofo_real
I have written many pieces on Terra in the past and have been closely following developments in Terra for around 7 months
Assuming validator delegation is restored, the community needs to unite around a common purpose and roadmap for USTC. Here are my suggestions.
1. Decide on a path for the algostable
- crypto ecosystem needs an algostable that’s 65-90% exogenously collateralized (eg, FRAX model but with BTC instead of USDC)
- Kwon was right that a decentralized economy needs decentralized money
- money is all about network effects / market share over time
- overcollateralized algostables like DAI need >$1 of assets for every $1 of DAI minted, so they must grow at less than the rate of crypto economy growth. However, on the other side, they are very safe
- DAI is an outstanding product for what it is, but we shouldn’t try to compete with it
2. Assuming we decide to revive the algostable, immediately build a reserve
- before its death, LUNA was 20% exogenously collateralized (mostly BTC)
- 70% would be a more reasonable reserve target
- this needs to be done immediately & maintained, can’t be something “we’ll get around to in the future”
- as we saw with Kwon, hubris is a powerful drug, we can’t trust individuals or “Multisigs” with that level of power again
- the reserve needs to be decentralized immediately - smart contract-based deployment, 100% on-chain; rule should basically be “for every 1% that USTC trades off-peg, deploy 1% of exogenous collateral defending the peg”
3. As a protocol, focus on real world asset integrations & real world demand
- USTC is the only non-ETH stablecoin, and has by far the largest number of active wallets of any decentralized stablecoin - that’s a key pair of competitive advantages
- an algostable that’s endogenously collateralized will only survive as long as its real world adoption (transactions or borrowing) is proportional to its endogenous collateralization
- therefore, the Anchor approach was a total blunder, creating billions of idle deposits ready to flee at any sign of trouble
- currency backing real world loans or used in everyday transactions, by contrast, doesn’t have such fickle loyalty. However, it takes much more annoying KYC integrations
- I work IRL for one such “crypto to real world asset / RWA” firm and if the community desires, I’d volunteer my company’s part-time assistance in this regard. It is a very tough set of technical problems esp. in the current market environment but it’s the only way
4. Understand that in owning a LUNC that’s viable, you own a hand-grenade financial product
- algostables, as we’ve learned the hard way, are very hard, even more so when they are “undercollateralized” (partly collateralized by a reflexive endogenous asset)
- there are many new members of the community who will hold the fate of this in their hands
- for those newer members … be very careful on governance issues. Don’t trust anyone who sounds one bit arrogant, cocky, etc. Don’t ever centralize authority in any “NewCo.” Ever