Understanding the Collapse of Luna and Terra: A Comprehensive Overview

hello everyone uh welcome to episode 41 um this is the english version of the episode 41 about luna and

terra so uh a lot has been said about the fall of terra uh the luna token and the usd

token which is the stable coin if you are in crypto you would have definitely heard about this story but

there probably hasn't been a video that i've seen or content that i've seen which explain the full story about what

happened so i will try and summarize everything that has happened so that an easy to understand word so

you understand why the fall had happened and you also understand how you can move forward terra is going to be relaunched

as a genesis chain or a new chain so all that you need to know before you uh invest in terror is what we'll be

covering today so let's start with the basics from the disclaimer and warnings i'm not a

financial advisor or an investment expert my videos are for learning purposes only so i just share whatever

that i have learned whatever that i have understood i share in my videos that's the primary purpose of my videos

please make your own decision based on your own research and also one of the most important warnings that i give is

that do not send your money to people who claim to be professional brokers or investor advisor anybody in the crypto

space that claim that they are a professional broker or investment advisor they're all frauds they're all

basically scammers targeting your money they will target you via emails comments they will probably use my name use

anybody's name never ever send your crypto to anyone because there's a lot of people who have lost their funds to

these so-called professional brokers and investment advisors so your money you invested

and i do not have any closed groups i don't have telegram groups or whatsapp groups because misinformation can easily

be spread if you're part of a closed group like that so i'm very active on twitter i'm active at chennai to london

is my handle that's the handle that i use i post constant updates i post uh more regular updates on twitter than in

youtube because youtube is not my profession but i use twitter as a medium to post regular updates not just me you

can follow if you are in the crypto space it'll be very useful if you follow the twitter handles and you can get

up to date information quite quickly also twitter is open and public so if i say something wrong it can be corrected

by others and there is a possibility of an open debate so first of all today's agenda what happened in luna

we'll talk about it a brief summary we'll talk about stable coins because it's very essential to understand

today's story different types of stable coin and why we never spoke about luna in our channel again you know we've

spoken about a number of blockchains in our channel but we've never spoken about luna so we'll talk about why luna was

such a huge risk from the beginning and why did it failed and what next from this point onwards so um first of all a

brief summary right terra is the uh blockchain network and it was founded by a south korean crypto and this is called

derkwan and the main it was launched in 2019. luna was the primary token of terror so as if the terraform labs the

company was created in 2018 and took them a year for them to launch the uh the terra network it was there was also

a person called daniel shin who was a co-founder who had left terror labs before even the mainland was launched as

i understand and we have seen in our channel we talked about a number of evm enabled

blockchains like the uh binance marching ethereum avalanche there was a lot of change that we have spoken what terra is

another blockchain network and luna was its base token like how bnb is the base token of binance marching cro is the

base token of kronos luna was the base token of the terra blockchain network so it was a decent

blockchain in fact from a d5 perspective it had a lot of total value locked in the terra blockchain and was a decent

blockchain but it was heavily controlled by dokwan and it was not necessarily in my opinion a true decentralized

blockchain i would say the algorithmic stablecoin they launched an algorithmic stable coin called terra

usd ah which was launched in 2020 although the main net of terra network was launched in 2019. the terra stable

coin or the terra usd with the symbol of usd was launched in 2020. in april 2022 or by april 2022 luna and

usd had a market capital of more than 45 billion dollars and they were on multiple centralized

exchanges and decentralized changes and usd trading pair was almost all as common as the usdt or the usdc trading

pass suddenly around the second week of may in may 2022 within a span of like two to

three days the entire value of the whole terra and the the luna and the usd collapsed and luna fell from 85 to

nearly like less than one cent and usd fell from one dollar to about five cents and what was supposed to be a stable

coin back to one dollar completely fell and the 45 billion dollars was nearly wiped off from the market in just two or

three days this is by far the most significant collapse not just in the crypto industry but the

entire fintech industry and why did this fall so dramatically what happened

um and we have spoken about so many true blockchains and many projects in our channel but we've never spoken about

luna or the use of usd or investing in the ecosystem of luna we've never spoken about as a blockchain or from from i

have not shared it from an investment perspective so why did we not speak about it and the fall of luna and usd

which is called as a death spiral was predicted and warned for several months by industry experts and yet nothing was

done to stop against it why was nothing done to stop so we look at all of these details in the most simplest and easiest

to understand ways that we could because a lot has been written but some of them has been too complex and too technical

for people to understand so in episode 20 uh we had talked about what a stable coin is a stable coin is

essentially a crypto token that is pegged to a real

world currency like for example if it's pegged to usd it's a usd based stable coin so there's a tether stable coin

which is uh back to usd and it's called usdt and we saw some of the examples so in that episode i had uh mentioned that

generally stable coins are backed ones to one ratio with real world money or assets in the bank account so like usdt

and usdc they are pegged by real world assets in the bank account or in the uh in whatever uh holding concept the

corporation has like usdc is found by the corporation called circle um which is uh backed by by coinbase for example

usdt is from the tether corporation however essentially there are three different categories three broad

categories of stable coins um other than the real world backing like what are these three categories so one is

obviously the real world currency we just spoke about usd usdc busd bsd from binance corporation for example they're

all banked by a um a real world asset and that's what is giving them the the value or that is what begging them to

the dollar the second category is a crypto asset based or over collateralized and multi

asset collateral stable coin called like for example dies uh from a maker doo cooperation we will talk about this in a

bit more detail so we can understand the difference between this and the third category which is algorithmic stable

coins so which is a single asset based it's a circular collateralization ah ust is one of the examples min magic

internet money is another example so just a recap for episode 20. so we

talked about uh something called as a circular funds basically um you have real world money and then when you buy a

digital asset or crypto asset using that real world money and then you collateralize that that

crypto asset back into the into the asset categorization then you are basically creating a circular

collateralization and you can do this repeatedly where if you put three thousand dollars as real world funds and

then you buy a crypto asset with the three thousand dollars and put it back into the uh asset categorization or put

it back as an asset collateral then you are basically creating a circular collector and this circular collateral

creates money out of thin air and we spoke about it in the case of usdt that a small portion of their backing

could probably be based on this kind of a circular collateralization but even

though a large portion was still banked by real world currency and how from a usdt perspective at that point of time

we spoke about the risk of having this kind of a circular collateralization so technically um all stable coins that are

backed by these kind of real world currencies need one central organization to car to to control this asset back

and so the all these assets are centralized so for example usdt usdc busd these are all centralized stable

coins because one party is the one that is controlling this and they are publishing audit reports and

there is a control over the decision of the asset packing so which is very which is where the need

for the decentralized stable coins came into picture stable coins obviously uh help us in terms of the trading instead

of you always using fiat currency because then you can always pick it to a dollar and you can compare it to a

dollar and the the crypto rates can also be very easily compared when you have stable coin pairs being traded against

it so in 2017 the world's first truly

decentralized stable coin uh or over collateral stable coin called die was created at that time die was a very

simple concept in fact it was backed by usdc so already usdz is a stable coin that is

backed by a real world asset what the dye was doing was that it was having usdc as collateral

and was using it as a part collateral and the rest of it was collateralized by ethereum and it was running on the eoc

20 protocol to begin with so technically instead of using a real world asset or real world currency as a collateral they

had already uh they had used an already collateralized stable coin like usdca part collateralized it and the rest was

over collateralized by ethereum stable coins or ethereum tokens for example eth in simple comparison if you know in

india or in any country for example there is pawn shops and you can go and put your um your gold jewels or whatever

set gold assets as collateral and you can get uh like fifty percent or up to fifty percent of forty percent of your

goals value so if your jewels values like for example you know ah thousand rupees or thousand dollars you can get

up to like five hundred dollars as loan from the pawnshop and this is basically what uh is happening in this kind of a

over collateralization so for example die can be minted as a one is to one ratio for usdc capacitor so one usdc can

get one diode but you can also get die by depositing ethereum but in a higher ratio so for example as just as a rough

example if you want thousand dollars of die then you need to deposit thousand five hundred dollars worth of bacterium

but what if the ethereum value drops right because ethereum is a a token which varies in value but you

need to always maintain this minimum ratio and if the ethereum falls down and if

you don't deposit more ethereum to maintain this ratio then there could be a liquidation

possibility so but you need to always maintain this ratio so in 2019 the single collateral was

replaced by multi-asset collateral meaning that you could collateralize it based on all the assets that were

approved by the maker do cooperation so if the collateral ratio is not maintained what generally happens

happens in the pawn shops for example is that if you are not able to pay back the the interest or if the gold value comes

down then the pawn shop owner will always have a contract with you saying that your jewels have sunk or it's a

common terminology that we use in india for example that uh then the pawnshop owner takes the ownership of the jewels

if you don't maintain a particular ratio or if you are not keeping on paying interest or if the gold value comes down

so this is the same concept and this is the safety net

that is used to maintain the the the dye collateralization and also make sure that the volatility of the die is not

impacted so for example if the ethereum value drops significantly down and you do not deposit additional ethereum to

maintain that ratio then the ethereum is gone it gets liquidated it gets absorbed by the dye network and that is the

simple concept that has ensured that dye has maintained its one dollar peg during the toughest of times including the

crypto meltdown of 2018. so it had faced so many tough times and yet it had never broken or it had never uh depict so much

and it has always maintained the begging to one dollars so um an algorithmic stable coin on the

other hand does not have real world funds and does not have other stable coins like ustc backing it

and it practically borrows the concept from dying but that instead of um having you know a stable coin backing it it is

backed by their own asset so few algorithmic stable coins have been attempted in the past and most of them

have resulted in massive failures there is a famous project called basis cache and we'll talk about this later why

we're talking about basis cache so that's when in 2020 tera labs under dokwan introduced the concept of terra

usd ust which is the ticker symbol an algorithmic stable coin that was backed by its own token which was luna token

luna was the base token of the terra network so they they built a simple algorithm to maintain the one dollar

peggy so we will explain this this simple algorithm in with examples and a bit

more detail but in principle this is like saying the analogy would be that instead of a bond

broker saying that instead of you know buying gold or instead of using gold as a collateral i have my own metal

use the own metal as the collateral and he sets a value for the metal or depending upon the the the popularity of

that metal he is himself using his own metal so that's kind of what teralabs was trying

to do at this point of time but but by this time terror labs had enough investors that that that own metal had a

value to it so there was a marketing campaign there was a lot of venture capitals uh who had put a lot of

investment money into terror labs and enough supporters of these projects then they created almost like a cult

following called lunatics the followers of luna were called as lunatics and there was an aggressive funding for

supporting this ecosystem from a lot of investors and this cult-like support led to the initial success of the whole

terra network and the cult-like support also meant that anybody who talked anything against

the lunar network were being shot down completely so essentially the the ust peg was

maintained by a simple demand for the lunar token the the terra network's own token the lunar token so

ah this is an image that i just copied from the internet but basically what it means is that

um if the if the uh the the ust is is above peg then it will burn more luna and if it is below peg then it can buy

more luna and you can ah you can use it to burn usd so we will see how this concept works in

reality but essentially the fundamental principle is that you can always in the terror money in the terror money is the

the ecosystem platform of luna you can always exchange one dollar of

usd for one dollar worth of luna and you can do the same this leads to an arbitrage scenario

which basically maintains the one dollar peg balance and we will see this if we see an example for example

so if usd uh the the stable coin is uh trading at greater than one dollar for example let's say it's at one point two

dollars so you can now buy hundred dollars worth of luna in the open market and you can exchange the hundred dollars

of luna in terra money to 100 usd so once you have 100 usd you can then go and sell the 100 usd in the open market

at 1.2 dollars which means that you will get 120 so essentially you had hundred dollars

you bought luna for that you exchanged it for one is to one equivalent and you got hundred usd and now you are selling

the 100 usd in the open market at one point two dollars you got 120 this arbitrage will give you a 20 profit

and this is a over exaggeration scenario but this is just to make you understand how simple that that logic works and

this what incentivizes the people to do it so when enough people do it the demand for the luna goes up the luna

price will go up and people will buy more luna and usd will naturally start when people start selling it usd will

naturally come back to one dollar because more and more people are selling the usd this is a common arbitrage

principle you can do this in any any

market basically you can buy it from one exchange if another exchange is having higher you can do an arbitrage arbitrage

is a very common principle so the arbitrage principle combined with the uh the single collateralization logic has

been used here to a certain extent this is not a new uh algorithm as such but what happens if

usd is less than one dollar right so for example let's say usd goes to 80 cents so you can buy 100 usd in the open

market and it is 80 cents each so you will spend about 80 dollars you can go to the terra money and you can exchange

this 100 usd for a hundred dollar worth of you know because again it's a one is to one

equivalent in the terra money ecosystem now you have hundred dollar worth of luma you can go and sell it in the open

market for hundred dollars again you took eighty dollars and you now be able to convert it to hundred dollars this is

a again a twenty dollar arbitrage profit that you've got this is what incentivizes people to

buy usd when the usd is going below the peg so when enough people do this there's a lot of people continuously

buying usd that demand for usd goes up and the price for ust increases as more and more people

buy the usd so anything that is exchanged in the terra money network is burnt so when you are basically uh

exchanging your ust into the terra money network that usd is burnt and the same thing happens for luna when

you're exchanging this point so the the supply of luna and terra is also reduced by having this kind of

arbitrage mechanism so this is a very simple concept where there is an arbitrage profit to be made

and people having the constant demand for either usd or for luna becomes like a circular demand and supply and that

creates the utility of one of the utilities for luna and that creates the value for luna and usd so

how does it work right fundamentally the the usd and luna exchanged like i said is burnt and the supply demand and

price is basically maintained in a state of constant equilibrium constant arbitrage and constant demand how do you

maintain the demand for usd um because why would you people buy usd in the first place right so obviously along

with the centralized exchanges of frigate one of the biggest drivers for the demand was

a protocol called anchor protocol this is one of the partner protocols of of luna that came into picture that offered

a 20 annual interest rate if you lock your usd into their protocol so people obviously exchanged their assets uh

converted it into us dollars or whatever and and bought usd or they bought luna and exchanged it in terra money and got

usd and somehow the ust was locked into the anchor protocol at an annual interest rate of 20 percent

and that led to the demand for ust in the first place and anchor protocol also bought

more luna with the money that they're getting from from these deposits and they staked luna for a yield so it again

like basically they created a value for usd and made people buy usd and they took the usd and bought luna again

there's more demand for usd so it's a circular demand that they've created so in january 2022 there was a

non-profit organization called the luna foundation guard that was also formed in singapore one of the reasons this was

formed was because there is this this there was this fear that there is no collateralization there is no backing

for the usd token and so um you know what happens when there is the demand dies down there needs to be

some sort of a real world backing is is what led to this moment and so they bought or they suggested

that there was a lot of investor funding there was a lot of funding that happened and

they were buying crypto assets like bitcoin and keeping it in the reserve to be used in an event when there is a

threat to the usd uh debugging from the one dollar or any threat to the ecosystem

lfg luna foundation guard was again founded by ours headed by dokwan and some of his

co-founders or crypto venture capital form heads so it was again a centrally controlled entity i would say at that

point of time so what was the flaw and logic of usd right the logic was simple but fundamentally

the biggest risk was the death spiral so the whole concept was built based on the

cult following of luna and the constant demand for luna the confidence of luna and ust so if there ever a threat to the

confidence of luna it was always going to fail because all it takes was the loss of confidence for

a token like this and it was doomed to fail as the liquidity to sell on an open market will

not exist basically the arbitrage will not work the arbitrage that we just explained so spectacularly and simply

will end up failing how so we will just again use a very simple scenario and explain why it will fail so

so let's say if usd goes to 80 cents so you buy 100 usd in the open market and ah for for eighty dollars and you get

100 usd now you're going to go and exchange this 100 usd 200 worth of luna and um you will get 100 worth of luna at

that point of time let's say the luna was uh 50 at that point right so you will get two luna now imagine you're

going to sell this to luna in the open market but by this time you had done all this the by this time when you bought

100 usd and you're buying 100 now what if luna had fallen to 39 what if there was a rapid fall and if in

the open market now luna is only worth 78 so you have your arbitrage has now resulted

in a two dollar loss this creates a panic on luna and panic on usd both because

a successful arbitrage what used to be a successful arbitrage has now resulted in a two dollar loss

let us look at example two where um it's going to create an even bigger loss but this time the the depending is much

smaller so ironically if the depending is let's say two percent 98 cents you go and buy a hundred usd worth of

usd i mean under dollar worth of usd in the open market so you buy it and you get 98

so you get it at 98 so now you're exchanging 100 usd in terra money for 100 worth of luna and let's say this

time one luna was again worth for fifty dollars so you get two luna and imagine if luna had fallen down to

thirteen dollars same scenario and you are now getting seventy eight dollars so now

your money is now twenty dollars you you incurred a loss from the 98 investment so

previously a big debugging we saw that it was creating only a two dollar loss wasn't significant but you can see that

the smallest depending will result in the biggest loss here and that's what is the uh the irony of it

that even the smallest debugging from one dollar will create a panic here and the longer that this depending is going

to last the longer the luna's value is also going to get lost or the panic is going

to increase so all you need to trigger the death spiral

was just pure logic and just enough funds to do it there was there was no secret about it it was a

very very simple logic to cause a chaos in this algorithm and it was pointed out several times by

industry experts analysts in fact back in 2018 when luna was proposed just as an idea one of the industry experts

actually posted and shared it saying that why it suffers from the the biggest flaw which is the dead

spiral it was pointed out several times at that point of time and it was pointed out that how the attack plan was so

simple for anyone who really wanted to attack it at that point of time and

also even back in like 2019 and 2020 and again in 2021 for example people kept pointing it out again and

again with simple examples as to how this collapse can happen and the detailed analysis of what we just

explained um and the logic was so flawed that several articles were written not just one it

was almost like a blueprint was written on how to attack it so there was a famous thread by a person called freddie

reynolds written in number 2021 i will provide the link in description where he had provided all the details like about

six months back so technically the precursor event um although the actual attack or our actual

event had started on the may 8th that the precursor event started on the may 4th

and the the trigger event was uh called as a a pool migration three pole to four boat migration so again

three pool is a liquidity pool on the curve finance um which is one of the primary battlegrounds of stable coins i

would say so curve finance was providing a an exchange pool between usdc usdt and

die so anybody who wanted to exchange usdc to usdt died to usdc die to usdt this was the biggest liquidity pool that

was available and this whole concept of liquidity pool in curve finance was called as curve was

where by providing liquidity in these liquidity pools it's like the um it's like the foundation of d5 lending and

earning and you will get rewards based on the biggest liquidity pool that is out there and this reward was also based

on who's having more liquidity who's controlling more liquidity in these liquidity pools so

die being the main decentralized stable coin of choice and curve finance was in a pretty dominant position at that point

of time and this three pool of usdc usd and dart was dominating the market and there was a lot of reward and money to

be earned if another stable coin was able to come and take the position of die and and

take these curve rewards basically and luna tried to go after the dye and tried to launch a concept called as

four pool where uh it was instead of died was trying to put usd and fracks is another stable coin from another third

party usdz and usdt and for stable coins like i said you know curve is very very important

because it maintains a huge liquidity pool and this deep liquidity also helps

maintaining the dollar peg so when so many stable coins are in one liquidity pool you can always exchange it for

another a low liquidity stable coin um like any token when the liquidity is low that can

be easily disrupted the price can easily be descripted so again

what happened was they were trying to move from this remove all the the liquidity of ustc

from the other liquidity pools and put it into a four pool liquidity for this this attempted destabilizing die or

taking over from die in terms of the dominant position and this was um expected that it will be

happening on the on the 8th the the formation of the four pool event so

the for on the fourth of may they created this liquidity pool and on the eighth of

may uh for forming into the four pole liquidity they removed liquidity from the other pools ust was removed from the

liquidity pools by the terra labs team and it was all announced everything was known to the public

so they they were preparing for the new four pool curve and they they removed onboard 150 million dollars worth of usd

from the liquidity pool so liquidity was removed which means that usd wasn't available that much so

at this point of time when usd wasn't available this much within 10 minutes of the liquidity being removed about 85

million dollars of usd was being sold in the liquidity pools which means that it was being over covered or overpowered

with with usd being excess of usd was being sold and usdc was being continuously

drained so when usdc was being continuously drained the liquidity pools ultimately ended up with a nexus of usd

and there was there was liquidity um that was not not there for the usd at that point of

time and this caused the initial depending of usd from one dollar to 99 cents so it's about a one or two cent um

that was that was depending at that point of time almost the whole of that sunday eighth of may usd was finding to

maintain its peg with several stable coins being deposited lot of other investors came in they were depositing

stable coins into the liquidity pool trying to balance usd but um ultimately usd was going up and there

were no other stable coins that were being left because it was continuously being sold in the market so

so there was no major effort at that point on that day from terror labs as i understand or as i have seen it and this

was the day that uh on this on the 8th of may on sunday if terra labs had wanted to do something they could have

acted quite quickly put back the funding into the liquidity pools and stopped the attack if they

wanted and on 9th of may the social media attacks started or people started

talking about it there were a few accounts that started talking about the debate because the dpeg was the usd was

was not one dollar for almost a whole day and people started talking over a stable coin that was maintained supposed

to maintain a one dollar defect was 99 cents for almost a whole day and i explained the importance of it not

having a one dollar peg earlier and this started the uh the the social media discussion now ultimately the one cent

depending and the social media discussion started the death spiral to kick him so

in many of the centralized exchanges ust was being sold below the pick so somebody had accumulated a lot of usd

before this date and they were selling usd for 99 cents so in almost all of centralized exchanges usd was being sold

exactly in that 99 cents so that the debugging was constantly shown in all the order books and in mass

volumes and this further escalated when the social when

the centralized exchanges were getting this 99 cents reflection of the deep begging the social media panic um

combined with the market panic and the cells started escalating into the retail uses so till the 9th of may it was

practically being controlled by a larger group but on the 9th of may the retail users started joining the planning for

the first time and mass selling of the usd started people started to withdraw from the anchor protocol as well so

suddenly where the liquid usd that was available in the market uh became like three or four times more because

the usd that was being logged into the anchor protocol was being withdrawn and being sold into the market as well so

what was now uh what was available as like you know 20 to 30 percent is now about 60 or 70 percent more

uh usd summer available in the market and being sold as well so the demand was going down people were selling more and

more and not enough people were buying usd so the supply was increasing rapidly causing the depending to happen even

more and what was happening was because everybody was going to the

terror money and using the usd to mint more luna to be able to go and sell it back

the minting of luna cost started increasing rapidly so luna was was where luna was being burned

because of the arbitrage it was being bought and burnt at the same time now people were only selling ust nobody

was buying usd which means that luna was not being burnt luna was only being minted more and more and suddenly then

the volume of tokens of luna was also going up and up and up and when the volume of

tokens was going up and up luna was also being dumped in the market and the lunar price started to go down

as well this is when the death spiral had fully kicked in luna foundation guard on the 9th of may

announced that it was selling some bitcoin but it was not very clear how much bitcoin they were announcing or

selling or how much funding they were putting back to stop this there was no clarity provided by luna at the point of

time so any aggressive action this is basically the second day on the monday uh 9th of may any aggressive action from

luna foundation card or dokkan or terra labs could have practically stopped at that point like you know all you need to

put is like a billion dollars or two billion dollars into the liquidity pool and that said the attack would have been

stopped or even a public announcement that they were putting something in place could have stopped it on 10th of

may tuesday literally it has been second day by now um dokwan announced that there was a recovery plan that was

coming and they were still working on it with no details whatsoever and again from that point for several hours till

about the 11th of may um nothing was being tweeted by the terra labs team they took on or by

anybody there was absolutely no plan and it was clear by by the 11th of may that by the wednesday that there was no plan

and nobody was was even trying to come out with a plan at that point of time and those are the

three crucial days where um terra labs did nothing and where actually the the luna lost its entire value so on sixth

of may luna was about eighty dollars it was prior to the attack on eighth of may it was about sixty five dollars on ninth

it had fallen down only to about fifty dollars and which is this practically the second day of attack even on the

third day of attack on the tuesday luna had fallen down to thirty five dollars which is not unheard of in crypto you

know several days even the biggest of the uh tokens have had a 50 or more than 50 false so even by the um by almost the

the tuesday uh luna's confidence was still high and an action on that point of time could have practically stopped

the attack in fact three days after the attack but by 11th of may is when um people had lost all hope because there's

no recovery plan being announced and it fell down to 1.7 so from about 80 dollars on when state had fallen down to

one point seven dollars about ninety eight percent done and on twelfth of may

terralab basically said that uh they are going to mint unlimited luna tokens to save usd so they were

willing to sacrifice the luna holders trying to sacrifice usd because usd was being seen as the primary asset that

they wanted to save at that point of time so on the 12th of may morning 12th of may luna had fallen down

from previous day 1.7 to about 30 cents it fell down to about three cents in the afternoon and about

less than one cent point zero zero three dollars in the night so

luna had kept on losing 99 of the value in a span of every six hours so people had been losing money

every six to seven hours continuously so this point of time i was actually in a road trip and was not

you know was not i was not following this so closely at that point of time

although i was following the news and i was understanding what was happening i was not able to tweet but this is the

time on 11th of may that i started tweeting about it explaining what was happening

and also explaining a long thread why it is not safe to buy luna because of what was happening i explained clearly the

the the loosing of the peg the chain reaction and also how 99 percent

funds are being lost and why i have not shared luna before i will explain again more as to why i had not shared about

luna but i also explained that it's not safe to buy it but people did not understand and a lot of other social

media influencer groups indian social media influencer groups who had absolutely zero knowledge about

what was happening in luna they were promoting this event or promoting the value loss saying that luna has gone

from 60 to one dollars and it could it could quickly come back without even realizing what was happening they had

zero clue about what was happening behind the scenes all they were saying was a price action seeing that luna had

gone from eighty dollars to one dollar in their mind that it could quickly go back to even if it doesn't go back to

eighty dollars if it goes to ten dollars it's still a ten times um profit and that's all they were

explaining in their accounts repeatedly and people following these social media influences

started putting more and more money and that's when i had to post again to explain what was happening so i again

and again posted said why is it going down 99 percent because they are minting luna by the second so in fact on on the

13th of may i posted a sample that in the morning there were about 350 billion tokens

and 350 million tokens and it had quickly jumped to about from from about 350 million when the start of

the event had happened it went to 350 billion about thousand times more in about four to five days

but within a span of hours it went about 6.5 trillion tokens so you can see how quickly they had minted money so a coin

that had a total supply of about 350 million went to 350 billion in two or three days

and then again from 350 billion to about 6.5 trillion tokens so they were minting so many tokens that it was pretty

dangerous to buy it and if you did not understand the the concept about total supply in a crypto and what the

total supply means to the market capital of a crypto then that's when uh you would end up buying these kind of

tokens and for the first time since i had started posting these crypto education contents

i always say not a financial advice but i practically posted it as a financial advice saying that do not buy this token

because what happened was people bought into the token with like thousands of pounds on

may 11th ended up with uh less than one dollar by the end of may 11th again by 12th

morning they had bought like again another thousand dollars within a few hours they ended up with one dollars and

on 13th if they had bought it within few minutes they were ending up with one dollars because that is the

ferociousness with which the terra labs and dokuan were minting lunar tokens at that point of time and they had zero

clue of the reality that's why i had to post again and again to people to explain what was happening because

people were buying it blindly because of the social media influencing that was happening at that point of time so

one of the tweets was even translated into a regional language again people understand regional language better in

tamil for example so if you are following me in another legion language and you understand my tweet you are

welcome to translate it into a regional language because that explains to people much better than just posting in english

that's why i do my videos in tamil and in english so um why did we i i mentioned in my

tweet that we have never spoken about luna or the turbo ecosystem why did we not explicitly mention about luna the

terror ecosystem and why have i not bought any uh of my or invested any of my funds into the blockchain despite it

being a decent blockchain huge tvl being invested in d5 and the huge support three main reasons one of the reasons is

its leader dokwan is an egoistic crypto leader who never listened to any rational argument

he had so much control over luna and the terra ecosystem in my view it's almost like justin sun uh controlling the tron

ecosystem which is why we've never spoken about tron as well that much and not gone into d5 off drawn

that is one of the reasons that it's not worth being part of moving into web 3. so

one of the things that we are trying to explain in our channel is about web 3 which we will talk about more and more

in the future is a true decentralization i did not believe that terra was a true decentralized network at all in the

first place and i had concerns that even a small portion of the circle collateralization

like we have seen in usdt where it was creating a circular collateralization of of usdt but usd was practically a fully

circular stable coin money created out of nothing so it had zero value from the beginning in the first place and the

community was a cult it was backing dokwan blindly regardless of what he was saying and they were termed lunatics and

they will shut down any rational argument against siluma ecosystem prior to this

in fact every rational warning explicit

scenario explanation dokwan has always responded by calling people stupid by

calling people by challenging them in fact by even challenging them to go and try any of these scenarios that

just unfolded and his cult also followed they called people delinquent they called people by

all sorts of curse words they were brutal to anybody who tried to explain or have a rational argument about them

in fact dokwan also publicly called out people as poor and he criticized whoever criticizes his algorithm he used a sense

of privilege to dismiss them he called them poor saying that you will always stay poor i don't have change for you

and all sorts of uh language that he has used in the past is something that a egoistic leader would use and not many

people in the crypto space are um are like this they're mostly humble like you know the banana ceo for example is one

of the most humble people so there are a lot of humble people in the crypto space in terms of leadership some people

involved for example but dokwan is probably almost like a justin sun i would say

and in fact one of the things that he wanted as a crypto leader is that most other crypto leaders want a

successful ecosystem they want all projects to succeed they want the other projects to succeed in fact they help

out each other if another project is in trouble they go out of the way to support other projects but dokkan

publicly wanted other projects to fail he in fact said this multiple times that he doesn't want just to succeed he wants

to make sure that the other projects fail in fact uh die for example he was trying to kill the entire die project

and he said publicly that i want diet to die in my hands in fact just about a week before this whole collapse had

started dokwan in a famous interview said that 95 percent of the crypto projects are going to die and there is

entertainment for him in watching all the other companies die the interviewer even jokingly said that you know you're

evil but that's how he was explaining was laughing about it saying that i am if there is entertainment for me to

watch these other crypto companies die and we've tried in our channel to stick to

facts personally we've tried not to go against individuals or not to explain anything about an individual but it's

very hard to explain the failure of this project and all the problems of this project

without explaining the the kind of individual that the quran was which is why we've spoken

about him no offense to him or no personal uh things against him so um again

the same thing that dokon is doing is now being controlled by justin sun he's launched

uh again a stable coin which is not backed by any uh assets and he's again

launching a decentralized stable coin similar to how the the uh usd was tried out called usdd so if you are

going to maintain your assets in a stable coin try not to maintain it in usd regardless of the initial promise

that it might offer so there was one allegation that was

brought out by coindesk that the famous stable coin or the failed stable coin basis cash was also something that the

terra labs and and dirk one was uh the ones that were creating it um but this it's not been substantiated fully but

the terra lab employs the former parallel employees have claimed that dokwan was the person who was behind it

so if this was true then he knew that the project would fail he knew that the logic would fail and yet he was still

dismissing people who were explaining it so after the 13th of may um when the final days of luna was was being

discussed many industry leaders stepped in and they were the ones who ultimately

stopped the meeting of lunar tokens and stopped uh dokkan from sacrificing more and more

lunar investors by by stopping the unlimited minting of lunar tokens and this was all done

without any consensus from the community this is all a completely unilateral decision taken by a few individuals who

were controlling the entire blockchain in fact the control was so prominent that the entire blockchain was halted by

the validators to prevent any transactions from happening so you couldn't withdraw from the exchanges you

couldn't make any transaction the exchanges the whole blockchain was completely stopped now

the whole concept of a blockchain is that it cannot be stopped it cannot be stopped by a group of people you know

the 51 percent uh poc or the pow whatever it is proof of work or proof of stake in

whatever it is there is needs to be a 51 person control to do anything against a blockchain that whole thing went out of

the window when you realize that the blockchain itself was completely stopped or halted by a group of individuals this

was later picked up by a lot of industry experts who were even questioning the validity of this being a true blockchain

in the first place if it can be stopped in in the you know in such an easy manner by just a group of people in

document caesar from binance even mentioned that he had a long call with the terror team

and to make them stop minting the lunar token and to make them to start the the the blockchain again else luna would

have minted trillions and trillions of more coins and people would have continuously kept on losing money at

that point of time it is only because industry leaders stepped in that luna was at least saved to that extent from

that point of time so having said all this a lot of retail

investors who got trapped completely trapped in luna and a lot of retail investors who had over invested

in luna alone so the key learning from all of this is diversifying i mentioned it multiple times diversify your

investments never keep all your investments in just one blockchain or one token or one group of tokens so even

um some of the projects that i have believed in i have personally invested in sha and have not taken off you know

there were examples of vex token for example the whole project tied

but that is where diversifying the investment i've always said that never keep your investments in one

bracket or one basket and it is it is too much of a risk to do that and a lot of people had put all their money into

lunar ecosystem and that's when they had lost practically everything during this point

and also do your own research the social media promoters including me i mean i'm not a social peer promoter i do not

promote anything for money if you had watched my channel i've never done any brand endorsements or any promotions

till now but a lot of people who post on social media are promoters of a coin they take money and they promote an

ecosystem for money with zero knowledge of what was happening so even during this demise

during the last days there were so many people like with the token with like on with so and so on and so on they were

just basically just uh you know promoting this this as an opportunity to buy into the token so spend time learn

crypto before you invest and knowledge is called crypto and lower your risk i've mentioned this

so many times that crypto is a volatile investment option so if you are here in this as an investment then you know

never risk more funds than you can afford to lose i posted an episode episode 19 where i've posted a lot of

risk reduction tips so you can watch it just as a as an idea on how you can control your psychology before you start

investing these will all help in the future especially if you lost funds in luna

where do you go from now so where do the retail investors go from now who've been holding thousands of dollars of worth of

luna or usd there have been several proposals some of them have been uh plans from doc

1 and terra labs to abandon the lunar chain and create a new token new fork basically without usd and

having realized that algorithmic stable coins don't work so one of them um that was widely

supported by industry experts like vitalik patern was the one below which is a pers from a person called fatman

and persian capital explained what it is basically the 99.6 percent of the investors are retail

investors and you can easily support them by refunding them by selling the funds that the lunar foundation guard is

holding whatever results that the lunar foundation god is holding and that proposal had a

lot of vote when it was proposed in the terrar money website but that has not been the one that was

taken forward by dokwan dokwan replaced it with his own proposal saying that he's going to create a new fork a new

token they're calling it genesis but it's particularly a fork it's just a copy paste abandoning the whole ust

abandoning the whole luna they're creating a new network this has been questioned by industry experts but that

is the one that is moving forward because that's the one that is basically being taken forward without consensus

from the uh or there is there is a consensus but it's because they control so much of the lunar ecosystem

so the the general consensus of the general um want of the investors is to burn the

lunar tokens and not for kitera 2.0 but uh they keep deleting all the posts in the terra money and even um the

forking you know people have called out why would 4k have any value but for all that's going to happen uh

the the luna uh ecosystem is going to get relaunched again with a

new name and they're just going to have the support again from retail investors who will blindly go and invest

because of the the amount of money that is being invested by the investors the venture capitalist that's what is going

to happen but if you want to stay safe then again know that it's a centralized ecosystem

it's not a truly decentralized blockchain and be aware that again this is going to basically fund the venture

capitalist and fund duke and his team and not going to be a a retail

investing as such it's not going to benefit the retail investors so uh 28th of may tomorrow actually is

going to be the day when the the new network is going to get lost ultimately what's going to happen is the tera labs

team will recover all their losses they will the terror labs team and the investors will will

will recover all their losses the retail investors will probably be pouring all

their money to fund these terror labs team and these venture capitalists when the the new terra uh ecosystem launches

on 28 may that's what is going to happen but again um

what this will all lead to the whole thing will lead to is that they're going to be draconian worldwide legislative

controls that's what is going to probably happen in the longer run because people will talk about this luna

fall this whole thing that happened similar to the 9 11 incident for i travel so this just an analogy that i'm

giving that you would have known this 911 incident september 11th on the twin towers when

twin towers was attacked the impact that it had on ad travel was that the security checks that got implemented

after that point for our travel was just so stringent that even 20 years later the impact is still being felt you know

if you have to go through security checks there's a long queue in the airport there's thorough frisking you

can't carry essential liquids and you have to reach the airport hours before the travel and the air travel has become

so much more complicated because of one incident and it was huge incident people lost lives and it's probably justified

what has happened but probably the the amount of impact that has cost is much more

long lasting and horrendous in terms of the the impact of uh you know going through airport security

and this event and luna the 14 could create similar impact in the long run um people could

like people already talking about making decentralized finance more and more difficult for the common man so the the

rich people they fly in business class they have priority lanes they have private jets but the common man will be

the one who will suffer in the end the retail investors will be the one who will suffer in there so the poor people

as per what the luna foundation or the luna group calls them

so the final words you know is there any um good news at all is there any positive in this whole thing that um

there's one big positive this is by far the biggest negative event in the crypto industry it's almost as big as the lee

man brothers fall in 2008 which led to the worldwide recession but uh it wasn't even the fall of luna

it was the fall of usd as a stable coin that had been used by so many centralized exchanges and held by so

many d5 protocols if this had happened in a traditional finance it would have triggered a

massive collapse but the major cryptos did lose its value like 12 percent impact almost for

bitcoin going from 35 thousand dollars to thirty thousand dollars and major stable coins like usdt busd um they have

all withstood further fury attacks fear and uncertainty and demand attacks um basically people tried to do the same

thing to usdt but usdt kept on you know withstanding all those attacks so with all the algorithmic stable coins

with at least usd gone what is left the majority of the market is no longer fake imaginary money so

again if unless and until if tron you know makes it more and more bigger with usdd

it could again cause a similar issue but hopefully not but all of this what it meant is that

the remarkable resilience the word resilience is the the one that many people have spoken about

so crypto token surviving this crash shows the progress that are being made in the blockchain industry and

personally it has only renewed my faith in the future of blockchain and crypto in the fintech industry so

um it's also a very very important that why we need to be careful in the choice of

our investments and why we need to spend more and more time in educating ourselves before we choose

um to enter into crypto or enter into crypto investment or blockchain investment into the future so

again um i just wanted to finish by saying that uh this this content is purely from an education perspective i

did not have anything against the the ecosystem or anything against any individuals i just wanted to explain in

the most simplest of words before you go ahead and continue your journey in the crypto

space so like always i hope you found this useful until next time thank you bye