What Terra’s Collapse Shows About Accurate Blockchain Data

What Terra’s Collapse Shows About Accurate Blockchain Data

With the start of the bear market in crypto coinciding with the Terra crash the value of understanding market metrics is even more apparent. What’s long dogged analytics is the question of how accurate on-chain data is for assessing the overall picture, with leading analytics company Chainalysis noting the issue of fake exchange volumes back in 2019 for example. At the same time more recent a study of the drivers for crypto market movements from the World Bank highlighted that total off-chain volumes appeared to be significantly larger than on-chain transactions. Some industry estimates indicate a roughly 6:1 off-chain to on-chain volume ratio. The total off-chain volume in the first half of 2021 was approximately $16 trillion, compared to $2.8 trillion on-chain volume. This means the report does not include purchases of crypto-assets with fiat currency, sales of crypto-assets for fiat currency and swaps between crypto-assets.

But is this lack of precise crypto data such much of a problem, apart from the researchers at the World Bank, surely on-chain data is sufficient to provide investors and traders what they need to know? Certainly, a good case in point is what the use of on-chain data to understand the Terra collapse, employed by Nansen’s research team. Through analysis of open data on the blockchain they discovered that a small number of players identified vulnerabilities early intro the UST de-peg, particularly in terms of the shallow liquidity of the Curve pools securing Terra to other stablecoins. In simple terms, the data showed these players withdrew UST funds from Anchor to Terra, bridged these funds from Terra to Ethereum, swapped large amounts of UST to other stablecoins in Curves liquidity pools, and during the de-pegging arbitraged inefficiencies between pricing sources from Curve to centralized exchanges. As a result, Nansen’s team were able to disprove the popular ‘attacker’ thesis supported by Terra themselves up until the present with the launch of Luna V2. And instead, it concluded in more objective terms that the collapse “could instead have resulted from the investment decisions of several well-funded entities”.

The question of the Bitcoin reserves is explored in a recent Forbes piece on the rise of off-chain metrics. What is clear from Glassnode is that of the 80,394 accumulated by Luna Foundation Guard (LFG) was emptied between May 9 and May 10, “with 52,189 BTC were sent to Gemini via over-the-counter desks, which were then deployed elsewhere, including Binance, and 28,205 BTC were transferred to Binance directly.” While this may sound like an aberration bear in mind that tracking Bitcoin as held on exchanges has been decline for some time, with these internal market trades already on the rise. As touched on in the World Bank report the rise of Bitcoin ETFs and ETPs could account for an additional 7% of circulating supply. From this perspective Bitcoin’s 17.3% decline in April was partly down to ETPs and ETFs and funds selling 15,000 Bitcoin. In other words, it marks the rise of trading activity off exchanges which makes understanding the range of data from on-chain to off-chain more important going forward. In addition, as shown in the World Bank report, the attitude the big institutional players take in the global Bitcoin market are far less sensitive to local intra-country economic factors. “For example, they may provide trading, exchange, market making, and custody services and may have diversified operations across countries which may make them less susceptible to local macro-economic conditions in individual countries,” the report found, whilst also admitting that “country factors also matter little for crypto volumes associated with smaller transactions. We leave deeper analysis to future research.”

Consider the thesis put forward by Arthur Hayes, co-founder of 100x, that the collapse of Terra was down to VCs that looked to cash out their Luna positions with “minimal market impact.” Because of the public nature of the blockchain key investors cashing out their Luna positions would be easily detected. However, due to the design of the protocol, which allowed in a 1:1 peg for Luna holders to redeem their holdings for the stablecoin UST, in principle with no impact on that peg and the value of Luna (which at its peak was $118). Therefore, rather than going through the more public channel of exchanges and instead using Over-The-Counter (OTC) involving direct trading between two parties the argument is that after converting Luan to UST the VCs then swapped for other stablecoins with no market impact: “My boy estimates that close to $5 billion of these flows took place. The start to the TerraUSD meltdown occurred when the peg broke slightly on Curve. This happened as too much UST was supplied relative to other stables like USDT and USDC. Once the peg begins to break slightly, and confidence in a quick reversion wanes, the negative convexity of the algo stable coin design takes over and creates an unstoppable downward force,” added Hayes in detailing the process of the $50 billion ‘death spiral’.

Back to on-chain metrics for another view of the current rash in the price of Bitcoin, bearing in mind the importance of also considering the off chain data such as wider macro-economic trends (the Fed’s moves on interest rates being an obvious example). Raghu Yarlagadda, CEO of FalconX, said regarding the value of on chain metrics, “the on chain analysis is still very relevant – it’s like if Apple were to report its quarterly earnings, however, instead of waiting 90 days to receive this information, you get it in real-time.” Indeed, backing up the pivot back to the focus on tried and tested in chain metrics for tracking the value of Bitcoin is the observation that some $53K made their way into exchanges on May 9, the single-highest inflow since November 2017. The main source? The Bitcoin from the LFG, which led to it crashing to its lowest level since late 2020 at just over $25K.

I believed that in the current crypto market it was worth investors and traders considering both on-chain and off-chain data. “The case of Terra’s crash shows it pays to see what the bigger players such as VCs are up to, as well as the day to day on chain price of Bitcoin. It’s also important for all exchanges to be honest about their own off-chain data in the form of trading volumes, to help rebuild trust in the crypto markets right now. That’s going to be particularly important in the near future as regulators are emboldened by the Terra crash to move forward with new restrictions.” Lian added that a controversial May 6 Reuters report using outdated information, in detailing alleged criminal transactions amounting to $2.35 billion by Binance, further underlined the value of accurate data to all stakeholders within the crypto industry.’

 

Original Source: https://www.securities.io/what-terras-collapse-shows-about-accurate-blockchain-data/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

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Four Good Reasons to Be Optimistic About Bitcoin: Is Bitcoin the cryptocurrency of the future?

Four Good Reasons to Be Optimistic About Bitcoin: Is Bitcoin the cryptocurrency of the future?

So far in 2022, the entire crypto market has been impacted by wider economic and political uncertainties, led by Bitcoin (CRYPTO: BTC), with prices down more than 50% over the past six months and the price heading for the ninth consecutive red weekly candle. And while Terraform Labs successfully airdropped new Luna tokens to previous holders, the market sentiment continues to be bearish, with the Fear and Greed Index remaining in the doldrums.

One way to avoid panic selling when the price of cryptocurrencies drop significantly is to remind yourself of the essentials, to stick to your plan and don’t invest more than you can afford to lose.  Of course, that’s easy to say when you’ve lost money in Luna and seen your Bitcoin investments go down in value. However, there’s also an upside to the current market conditions as users can now buy Bitcoin at the new low price around the $30,000 mark.  But no matter what level your holdings in the current market, you should be optimistic about the long term viability of Bitcoin. Here are four key reasons to consider, to help re-frame your mindset and support your belief in Bitcoin going forward.

Mass adoption of crypto assets

According to relevant data, cryptocurrencies have reached a tipping point in 2021.  It has evolved from what many consider a niche investment to be a global, established asset class.  Venture capitalists are pouring money into the cryptocurrency market.  Among them, venture capital invested more than $30 billion in crypto assets and blockchain startups, with more than $10.5 billion in investment in the fourth quarter of 2021 alone. With an estimated $10 globally in the first quarter of 2022, reportedly the largest amount to date, and double the level for the same quarter in 2021. In fact, investment in crypto has continued to grow despite this year’s decline in Bitcoin price. “This decoupling is demonstrative of investors’ disbelief that a prolonged bear market in digital assets is forthcoming, as well as the significant amount of dry powder held by funds seeking to allocate to the sector,” said Alex Thorn, head of firmwide research at blockchain-focused bank Galaxy Digital in New York earlier this month.

Many major financial institutions are also exploring cryptocurrencies.  Recently, Fidelity, the largest retirement plan provider in the US with over $4.2 trillion in assets under management, said it would allow investors to deposit up to 20% of their retirement savings in the form of Bitcoin into their accounts.  While banking giant JPMorgan recently said that despite the crypto crash, its estimate of Bitcoin’s fair value is $38,000. “The past month’s crypto market correction looks more like capitulation relative to last January/February and going forward we see upside for bitcoin and crypto markets more generally,” the bank’s strategists said. In addition, both Visa and Mastercard have launched their own crypto cards.  And as the regulatory environment is catching up, ironically thanks in part due to the Terra collapse, there is reason to believe that cryptoassets will enjoy mainstream adoption in the future.

Countries adopting Bitcoin as legal tender

El Salvador was the first country to adopt Bitcoin as legal tender, led by President Nayib Bukele, but so far it remains uncertain whether the bold initiative will succeed.  As reported in the Wall Street Journal on May 14, “there are no indications that Mr. Bukele plans to change course. On Monday, he said on Twitter that El Salvador bought 500 bitcoin at an average price of $30,744. “El Salvador just bought the dip!” he added.” It’s not just El Salvador, the Central African Republic also recently approved Bitcoin as its national legal tender.  No one could have imagined that this cryptocurrency, which was only invented some 13 years ago, could become the legal tender of a country today.  If these experiments succeed other countries may adopt Bitcoin or other cryptocurrencies as their legal tender in the future.

Is Bitcoin the cryptocurrency of the future?

One of the appeals of Bitcoin and other cryptocurrencies is that it removes friction in terms of costs and transaction speeds from payments, especially international transfers.  Indeed, according to Ark Invest, cumulative Bitcoin transfers have grown by more than 463% in the last year.  ARK analyst Yassine Elmandjra wrote in the report ‘Big Ideas 2022’ that Bitcoin will settle $13.1 trillion in 2021, a figure that even exceeds Visa’s payment volume.

Ark Invest’s research also highlighted several areas where Bitcoin could take market share from traditional activities. These include international remittances, emerging market currencies, institutional investment and acting as a form of digital gold.  Some experts predict that if Bitcoin can make significant progress in advancing these use cases, its price could exceed $1 million by 2030.

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Source: ARK Invests Yassine Elmandjra tweet, Jan 25, 2022

Bitcoin’s innovation continues apace

Although Bitcoin is not run by a centralized organization, it continues to grow along decentralized lines.  There is a small core group of developers working on improving the network, fixing bugs and security issues, and improving functionality.  For example, last year Bitcoin implemented a major upgrade called Taproot to improve privacy, scalability, and security.  Another potentially significant move is the development of the Lightning Network, a layer 2 solution to Bitcoin that reduces costs and increases speed.  As reported in Cointelegraph on May 30, “Bitcoin Lightning Network capacity attained an all-time high of 3915.776 BTC, as evidenced by data from Bitcoin Visuals, displaying a commitment to the cause of improving BTC transaction speeds and reducing fees over the layer-2 protocol.” This follows news from CEO of Strike, Jack Mallers, at the Bitcoin 2022 conference, that the company’s plans to collaborate with point-of-sale behemoths Shopify, NCR, and Blackhawk Network to revolutionize the payments industry. As a result, online retailers that support Shopify can now accept payments via the Lightning Network, in turn allowing US merchants to receive payments from customers globally as US dollars. As the integration of the Strike wallet is with major online players in the US economy, this could potentially do a lot for the broader adoption of Bitcoin in the retail industry.

While there are good reasons to remain optimistic about Bitcoin, there are also still many things that investors and traders need to be careful about when investing in Bitcoin and cryptocurrencies.  Data in recent months confirms once again that cryptocurrencies are a highly speculative and volatile asset.  Cryptocurrencies are still a relatively new sector compared to traditional investments like stocks and funds, and while we don’t have certainty exactly how it will develop in the long term the potential is clear to see. “I believe Bitcoin is a viable long term investment both as a store of value looking to the future, with the price trending significantly upwards after each halving event. But also, I’m excited about the rapid development of the Lightning Network, for both retail players but also for financial inclusion across the globe,” said BigONE Chairman Anndy Lian.

Original Source: https://www.benzinga.com/22/06/27599358/four-good-reasons-to-be-optimistic-about-bitcoin-is-bitcoin-the-cryptocurrency-of-the-future

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

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What is Terra Luna 2.0? Everything you need to know about Terra’s fork

What is Terra Luna 2.0? Everything you need to know about Terra’s fork

The Terra Luna community has approved of the revival plan that would see a hard fork from the failed token and the creation of a new blockchain Terra 2.0.

Earlier this month, LUNA crash made headlines, sending shockwaves through the wider cryptocurrency space, with bitcoin (BTC) and ethereum (ETH) crumbling and cryptocurrency trading platform Binance (BNB) forced to suspend trading.

The luna coin is part of a dual-token system along with Terra’s US dollar-pegged stablecoin Terra USD (UST).

Terra USD is an algorithmic stablecoin, which means that its peg to the US dollar is ensured by algorithms and game theory, using a series of smart contracts to keep the price at $1.

When UST unpegged from the USD on 9 May, UST redemptions massively inflated LUNA supply, driving the price down by 99%. The UST crash happened as the algorithms could not keep up, forcing the Luna Foundation Guard and its governance team to sell their bitcoin reserves to save the stablecoin.

This caused BTC to drop to $27,000 and wiped out nearly $400bn of the total cryptocurrency market value.

What is LUNA 2.0?

In a new plan proposed by Kwon, the Terra blockchain would undergo a hard fork, with the launch of Terra 2.0 and the old luna tokens being  renamed into luna classic (LUNC). Kwon’s revival plan has passed with 65.5% majority approval.

The snapshot for Terra 2.0 given by Kwon gives an idea of how the blockchain would work and states that the new Terra will be created without the algorithmic stablecoin.

The Terra Builders Alliance have provided technical details on integration, decentralised applications (dApps) migration, and a guide to rebranding the original Terra chain as ‘Terra Classic’.

The tokens will be renamed as Luna Classic (LUNC), and while the original Cosmos chain will continue to operate, the option to mint or burn coins will be disabled.

The new blockchain is due to arrive on 28 May, according to Terra’s twitter. “The community has been working around the clock to coordinate the new chain’s launch,” the project said.

Terra Station, Terra Finder, the project’s block explorer, and Terra Observer, the project’s feeder for dApps, will all have full functionality when the network goes live, according to Terra’s team.

How will LUNA Classic work?

What is Terra Luna Classic (LUNC)? It’s simply a new token that will replace failed LUNA coins. In the latest LUNA 2.0 news, the new tokens are being airdropped to LUNA and UST holders on 28 May, according to Terra’s Twitter.

There are predetermined groups that are receiving airdrops of the new LUNA coins:

  • Community pool will receive 30% of the token distribution, with 10% earmarked for developers.
  • Pre-crash LUNA holders will receive 35% of the new tokens.
  • Pre-crash UST holders will receive 10% of the new tokens.
  • Post-crash LUNA holders will receive 10% of the new tokens, including staking derivatives – 30% of the tokens will be unlocked at genesis, with the remaining 70% vested over two years, with a six-month cliff.
  • Post-crash UST holders will receive 15% of the tokens – 30% of those are unlocked at genesis, and 70% will be vested over two years, with a six-month cliff.

Terra will airdrop the new LUNC tokens to all LUNA holders with at least 10,000 of luna tokens or less “to ensure that small luna holders have similar initial liquidity profiles”.

The governance will also remove Terraform Labs’ (TFL) wallet from the whitelist for the airdrop, to make Terra a fully community-owned chain. Additionally, a large portion of the token will be allocated to Terra dApp developers to make the ecosystem successful in the long run and provide network security.

Terra LUNA recovery will depend on how its developers and governance team manage to prepare core public infrastructure, wallets, GEN file, execute the launch, provide oversight on essential development programs and act as a steering committee for the new chain.

Meanwhile, Terra ecosystem has millions of users globally, and the Terra Station allows developers from across the world to work together on multiple projects from decentralised finance (DeFi) to fungible labour markets, enabling them to use state-of-the-art infrastructure and gain community experience.

LUNA Classic forecast

“No matter what the price is and how the fork is going to turn out, the more immediate thing to do is to stabilise the projects in their current ecosystem.”

by Anndy Lian, chairman at BigONE Exchange

The future of Terra (LUNA) depends on its successful rebrand and launch. With the Terra community’s strong support to give LUNA a rebirth, the team is on the recovery plan. Popular Terra Classic projects, Astroport, Nebula, Prism, RandomEarth along with several others, will be migrating to the new Terra.

As of 27 May, the LUNA classic price stands at $0.0001313, according to CoinMarketCap’s Terra Classic market page. However, as Terra Chain will be rebranded as Terra Classic the price data would migrate to Terra V2 CMC page.

As the new LUNC coin is at the very early stage, it is extremely difficult to forecast its further direction. As of 27 May, an algorithm-based forecasting service Price Prediction suggested that the new coin to average at $0.00017152 in 2022, rising to an average of $0.00052103 in 2025, and averaging at $0.003 by 2030.

However, these predictions are based on algorithms and do not consider the current scenario. A rebranding attempt to save the crypto and regain the community’s trust will depend on how the launch plays out and if the Terra team can succeed in the airdrop mission as promised.

Anndy Lian, chairman of the Netherlands-registered crypto trading platform BigONE Exchange said that Terra community is remaining strong, yet he’s uncertain for how long.

“They are willing to make changes on their own. Some of them even go to the extent of sending their own wallet to the burn address to help reduce the supply. This is the kind of commitment you see on the ground,” he told Capital.com in a note.

“But such moves by the community are temporary and will not last long given that the core issues are not resolved. They have to clearly state how the funds were being managed, who was and is involved in the whole process.”

Lian believes that in order for Terra 2.0 forking to succeed, the project needs trust and transparency, which would ensure an upbeat outlook and speedy growth.

“Many people out in the market are just concerned about the price. The truth is no matter what the price is and how the fork is going to turn out, the more immediate thing to do is to stabilise the projects in their current ecosystem, let them migrate their dApps and apps to the new blockchain so that they do not have any downtime,” Lian added.

Note that price predictions can be wrong and shouldn’t be used as a substitute to your own research. You should always conduct your own due diligence. Keep in mind that cryptocurrencies are extremely volatile, and never invest or trade money you cannot afford to lose.

 

Original Source: https://capital.com/terra-luna-2-0

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

j j j