The founder and CEO of American hedge fund manager Pershing Square Capital Management chided the Terra team for creating artificial demand for their product.
Bill Ackman declared on Twitter that one of the main reasons for the collapse of Terra is a pyramid scheme of business. Investors were promised a 20 percent return backed by a token whose value is driven by demand from new investors. In essence, says Ekman, Terra has violated a fundamental business principle.
The billionaire criticized LUNA for creating artificial demand by restricting supply with a vesting schedule – where an investor’s tokens are locked up for a certain period and then distributed evenly. In the case of LUNA, the blocking period could take from 10 to 18 months.
“LUNA was valued for attracting more users and limiting the supply of tokens according to the vesting schedule. So when LUNA’s sellers outnumbered buyers, it collapsed,” explains Ekman.
However, despite the distrust of such business models, blockchain is a brilliant technology with huge potential, says the billionaire. However, if the industry does not gather strength, this potential will come to naught. The crypto industry must learn to self-regulate other crypto projects that are not based on traditional business models, says Ekman:
“The promotion of tokens that are not supported by organizations that produce something of value will destroy the entire crypto industry.”
On Wednesday, June 18, the Terraform Labs team of lawyers and compliance specialists quit almost at full strength amid the collapse of the UST. The legal affairs of the company are now handled by a third party firm.
Source: Bits
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