Blockchain Terra has been suspended twice in recent days. The reason was the value of its main cryptocurrency LUNA and associated stablecoin TerraUSD (UST), which collapsed as a result of a sales wave. Numerous incentives and attempts to save the blockchain were not enough, which resulted in the collapse of the ecosystem with 110 applications connected to more than 4 million digital wallets. What does this event mean for the cryptocurrency market?
What will happen next with the Terra blockchain? Black clouds are gathering on the Internet
Despite the collapse, Do Kwon – Terra’s co-founder – is still trying to save his ecosystem. On Monday, he proposed a plan to launch a new version of the blockchain without UST, but with the current price of the LUNA token, this attempt may be unsuccessful. Meanwhile, many of its functions have been disabled.
– Terra in its present form is dead for all practical purposes – said Kyle Samani, co-founder of Multicoin Capital.
The collapse of the Terra-sized cryptocurrency ecosystem – once worth more than $ 40 billion – will open a new page in blockchain history – a digital technology created more than 10 years ago to support Bitcoin that now supports countless cryptocurrencies. appeared since then.
Many small blockchains have collapsed in the past, their coins cost less than $ 1, and users were few – usually victims of poor design, designer conflicts, or breakage. In the current situation, Terra faces the same situation, but on a larger scale.
– I think the amount of defense will start to decrease and then it will die completely. When there is no more economic incentive to keep the blockchain, someone will simply turn off the electricity Said John Griffin, a professor of finance at the University of Texas at Austin.
In fact, a blockchain is a database that can accept hundreds or thousands of applications and record related financial transactions. Typically, they are open source, supported by operators created and refined by the community of developers, and rewarded in the form of tokens or coins created specifically for use in a particular blockchain, checking transactions.
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Tokens can also be used as code upgrades, new applications, and as a reward for so-called sting that the owners give their coins to the operator who orders the exchange in exchange for earnings.
Therefore, blockchains are fragile financial ecosystems consisting of endorsers, users, developers and investors, and their contribution is directly related to the prosperity and value of the blockchain. As more and more participants are involved and activities increase, the value of individual coins will also increase, resulting in more users.
However, if the sign of a given chain fails, all users will lose motivation to support it. On the other hand, if the loss of value seems permanent, then only a few ideological fans remain – all the rest are gone. In this way, the blockchain can simply die.
In the case of the Terra network, one of the foundations was the UST stablecoin, which ceased operations as planned. Recall that it is designed for LUNA token traders to use algorithms and incentives to keep in touch with the dollar from 1 to 1. These mechanisms have recently collapsed, leading to a sharp drop in both UST and LUNA prices.
As value and digital coins fall, blockchain activity is systematically declining. Staking has almost stopped – according to Terra Station, only 0.01% of all LUNAs are currently staking.
According to another follower, DeFi Llama, the total value of LUNA, which is locked in applications such as the DeFi Anchor Protocol, fell to virtually zero from $ 31 billion in April. In turn, the Terra Dapp Expo, an event planned in June to present the ecosystem of blockchain developers, was canceled.
– We need a week or two to think about what will happen in the future. Our team is in mourning, and so is our society – Written by the developers of Nexus Protocol, which works closely with users of the Terra network.
The network is considered dead when new developers do not come to build it and the existing ones are gradually withdrawn.
– As hopes for rebirth among Terra’s followers linger, “the final collapse may take a long time, but the only direction – if no miracle happens – is to decline.” Aaron Brown, a cryptocurrency investor who wrote articles for Bloomberg Opinion, said.
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