OPINION: Time to learn from Luna’s crash before building anew

Look at almost any market right now and you’ll see it in free-fall: stocks, commodities, and tech have all taken hard hits. But no industry has suffered such a fast loss of capital and confidence quite like cryptocurrency has over the past weeks.

Many believe the crash came at the hands of one stablecoin protocol and its extremely cocky founder: Luna and Do Kwon. Only, it’s not so simple.

At its peak, Luna and its stablecoin sister-asset TerraUSD had a combined market cap of nearly $80 billion. Real money from real venture capital firms — such as Binance Labs, Jump Trading, and Celsius Network – poured into the stablecoin with absurd and impossible returns promised.

When I tried to explain this to a friend not familiar with stablecoins, they asked me an obvious question: “So, all these big firms and smart investors put money into a stablecoin promising 20% returns. Why?”

The answer I gave was greed. Stablecoins should never promise massive returns; it shouldn’t be a part of their adoption strategy. Yet it undoubtedly was, for Luna, TerraUSD, and many others like them.

What occurred with Luna and its stablecoin wasn’t down to bad code, unnoticed attack vectors, or a complex hack — it was an unchecked money grab. Now, it appears that those who came out on top want to just move on.

Luna’s crash may cause side effects like amnesia

The Ponzi-like aspects were evident before the inevitable crash. A few skeptics spoke out, but many wealthy individuals who knew exactly what was going to happen with Luna and TerraUSD kept silent — or worse yet, listed the Ponzi-like assets on their cryptocurrency exchanges.

After Luna’s crash, these same people were the first ones to attempt to distance themselves in any way possible. Binance, the largest and most liquid cryptocurrency exchange in the world, owned and operated by Changpeng Zhao, was a first round investor in Luna (via Binance Labs). It’s hard to imagine that Zhao didn’t “know it too well,” as he conveniently later claimed.

Meanwhile, Sam Bankman-Fried, the founder of FTX, disagrees with comparisons made between Kwon and Elizabeth Holmes. Why? Well, according to Bankman-Fried, it’s because everyone knew Luna was a Ponzi doomed to crash from the outset, whereas Holmes was committing outright fraud by purposely deceiving Theranos investors.

That’s a very nice way of self-characterizing the role that exchanges and venture capital firms played in pushing the Ponzi up, up, and away.

Learn before you build

Building, or “buidling,” is commonly heard among crypto advocates and developers. The idea is that if you pause to criticize or reflect, you’re wasting time better spent working on solutions.

However strange to think, it seems as if the entire industry is gaslighting itself — attempting to persuade there’s no need to stop and contemplate the systemic risks of the current markets, the exchange owners who retain immense power, or the Ponzi schemes that are heralded by some of the most well-known people in the industry. Not to mention the countless people losing their mortgages or life savings.

The response from the industry to Luna’s crash was the same as it’s always been in the wake of a scandal: Well, the rest of us aren’t like that scam.

It’s astounding to me that people who claim to be building legitimate projects aren’t more incensed that unheard sums of cash went to an inherent out-and-out failure as opposed to them.

Read more: Luna 2.0: It came, they sold, it tanked

Multiple billions of dollars have been poured into a stablecoin doomed by its very nature to fail instead of into projects that could benefit any number of worthy causes. It should make you angry. It should make someone trying to build in the crypto space enraged.

Skeptics and critics alike, on the other hand, have reacted with a misplaced but well-intentioned “I told you so,” meant to simply teach a lesson — which can understandably cause a similar reaction of rage. I know I’m guilty of this too (and I’m sorry!) but I hope that moments like this lead to education, bridge building, and understanding.

For more informed news, follow us on Twitter and Google News or listen to our investigative podcast Innovated: Blockchain City.