Binance CEO Shares His Reflections on Last Week’s Terra Collapse
Table of contents
CZ Highlights the Lessons
In a recently published blog post, CZ noted that his focus was to protect affected users on his platform while highlighting the lessons everyone can take from Terra’s demise.
He noted that the first design flaw of LUNA was that the system could mint a limitless number of new tokens. In his view, 'Printing money does not create value; it just dilutes existing holders,' he wrote.
“Exponentially minting LUNA made the problem a lot worse. Whoever designed this should have their head checked,” he added.
CZ Believes UST Peg Could Have Been Restored
Zhao also slammed Terraform Labs for its response to the crisis, arguing that its decision to use LFG’s Bitcoin reserves to stabilize UST after it had lost its peg was “stupid.”
He noted that the crash might have been averted if the team had used their Bitcoin reserve when the depeg was at 5%. Instead, they waited till around $80 billion was wiped off the market before trying to restore parity with $3 billion.
He also acknowledged the need for stablecoin regulation, before committing to building a sustainable blockchain ecosystem for all.
“While instances like the one with LUNA and UST are regrettable, we are committed to playing a crucial part in building a sustainable, enriching blockchain ecosystem for all,” he wrote.