I've been trying to soak in recent events and attempting to make up my mind about it all. The truth is that hindsight is always 20/20 and a post mortem analysis is never too hard to come up with, but I'm too tempted not to add my two cents to the pot.
It does not take much for you or I do go down the rabbit hole here, and try to follow the logic as to how LUNA failed, how when the PEG broke, everything broke, but putting all those facts aside, to me the simplest way to analyze it is this...
How centralized was it?
Which is the question that we don't ask ourselves often enough to be honest. Yes, centralization/decentralization is a spectrum, I will grant you that. But, at the same time, it doesn't seem to be that there was much decentralization happening.
The fact that the CEO of Terraform Labs had the power to use the funds to buy Bitcoin to ensure the value of the LUNA token, suggests to me he WAS the currency. It was not done by smart contracts as far as I can tell, but more calculated decisions by Terraform Labs.
I'm trying to say
There is no project that is failure proof, none. Not even Bitcoin as much as we put it up on a pedestal, but if there is a project out with catastrophic single points of failure, then it's not a matter of if, but a matter of when.
To apply it to our environment, to Hive, because It's relevant for us, the users of this platform. It seems to me that prior to Hive evolving into what it is, this environment existed on similar dynamic. @ned was for better or for worse the Do Kwon of our story, and we know how his decision, his sale to Justin Sun played out.
The more I think about it, the more I'm confident of my investment in this platform. Not because it's perfect, we know well it's weaknesses, but because it's battle tested. It's survived terrible decisions from people with centralized power, and one would even argue continues to prove it's value and potential.
What's the lesson?
The lesson people never seem to learn is simple: If it's too good to be true, then it's not true.
But it doesn't matter how many times we say it, how many times it's posted, how many videos someone makes about it. People will buy into things without understanding it, and sometimes they will get lucky, but most of the time they'll get burnt.
Did I learn the lesson? Well, I too got rekt once so hard, I still feel the effects from it. I would love to say I know better, and for the most part, when I'm presented these "amazing projects" I analyze them with a cold heart, and thus stay away. But, I know better than to say I'm above being scammed.
I feel terrible for those who lost everything. Yes, I know it's their fault, but being someone who got pulled into a scam once, I can empathize with drunken stupor of believing this is your way out of the rat race.
That being said I can guarantee one thing. Terraform Labs won't be the last of it's kind. Plenty of stable coin projects come and go, and the cryptospace is mostly scams still to this day.
Not that someone needs to listen to advice from me, but I have one mantra I keep on repeating to myself: If it doesn't make sense, might as well be shit, no matter how many people eat it.
Harsh, I know, but so far it seems to be working for me.
MenO
For the most part I agree with all of this post,
but there are some key things to be pointed out.
This is a super interesting one, because in this case, it was perfectly decentralized. In this case, it was the decentralized permissionless code that failed and caused a death-spiral, not any centralized agent. If we are looking for a centralized agent to blame, all we can do is blame the billionaire entity that saw the weakness and exploited it with aggressive shorts, causing widespread panic.
The fact that Do Kwon secured some Bitcoin to enforce the peg doesn't make it any more centralized. It's just a free market. Anyone can do anything in a free market. If some billionaire said they were going to do the same for HBD, would that make HBD any more centralized? It wouldn't.
In this case it was known how flawed the system was in advance. Many people talked about how dangerous the debt ratio was. There was no other reason to buy those billions of dollars of Bitcoin to back it up otherwise. Kwon thought this would be enough. It was not (by a long shot).
This is a lesson that can't be learned in crypto. I was airdropped $2500 for free for every single metamask wallet I used via the Uniswap airdrop. That's too good to be true, yet it was true. Coins going x100 in a year is too good to be true, but it happens literally multiple times a year. It's nearly impossible to distinguish what is real vs what is fake these days. Simply claiming an airdrop on an EVM chain can now steal all the money in your wallet. It's insane.
Did I just write a comment as long as the OP?
God damn it!
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thanks for this comment, cleared up a lot for me.
That being said. What are your thoughts on the critique that all algo stablecoins are destined to die off. I know you believe or believed in MAKER, but does this change your point of view at all?
A rational analysis should be devoid of passionate perspective. When I lost everything I'd ever owned, every time it was because failure was not an option. When failure is not an option, it is sometimes the only possibility. I know a guy who had every penny of his life savings in Kmart. When I heard this I immediately recommended diversification, which he pooh poohed so hard I haven't spoken with him since. I should oughta stop by and see how he's doing. Last I heard Kmart still had two stores in America. I hope he's doing better than Kmart.
woah... the Kmart story is quite intense. I don't even understand what happened to them. I would have though of it as a solid investments back in the day.
Can't agree more!
Certainly, there are scams in crypto and we must be aware of catastrophic single points of failures. At the same time, innovations thrive with failed experiments.
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we need these failures... in a way they are part of maturing