Tether CTO Paolo Ardoino sees no fraud in the collapse of the Terra ecosystem and the UST stablecoin. In his opinion, it’s just the bad architecture of the project.
During the Reimagine podcast, Paolo Ardoino compared stablecoin TerraUSD with a house of cards that can collapse at any moment. One of the main problems of the project, according to CTO Tether, was the too high opinion of the founder of Terra, Do Kwon (Do Kwon):
“I don’t know Do Kwon. And let’s give him the benefit of the doubt about the fraud. He created this project and was arrogant towards it and others. He was sure he was right and attracted many people. They probably supported him for economic reasons. But the project itself was not fraudulent. This is a poorly designed project, like many others, with poor architecture and planning. Like a house of cards, it could collapse, but of course Kwon couldn’t say that, because then Terra would have collapsed much faster. And, again, it was clear to me and many others that this was a bad idea.”
Ardoino noted that the capitalization of UST grew too quickly and significantly to maintain a peg to the US dollar, as there were not enough reserves, including bitcoins. But these reserves were enough for “further collapse of the market.”
“Essentially, we saw a cascading fall. When they sold collateral to support the UST price, it put more pressure on the market and they had to sell collateral again. And so on,” explained Paolo Ardoino.
The CTO of Tether and Bitfinex noted that regulators need to pay attention to this situation. And, first of all, to introduce a clear categorization of stablecoins, to separate fully backed tokens from algorithmic stablecoins.
“UST is an algorithmic stablecoin, while Tether is centralized. These are very different things, with different collateral, different guarantees and insurances, and many other differences,” said Ardoino.
Recall that Bits.Media published a large-scale material with a detailed analysis of the reasons that led to the collapse of UST and LUNA.