Terra (LUNA) Collapses Big Step Back for Crypto Decentralization: Ethereum (ETH) Creator Vitalik Buterin
The co-founder of Ethereum (ETH) says the implosion of stablecoin issuer Terra (LUNA) earlier this year dealt a major blow to the decentralization of crypto.
In an interview with The New York Times, Vitalik Buterin says that decentralization in the crypto space has been moving in the right direction since the epic collapse of defunct digital asset exchange Mt. Gox in 2014.
According to Buterin, hacks involving centralized intermediaries spurred people to move toward a decentralized model when buying and selling crypto, which he notes worked well until the Terra meltdown in May.
“And so you don’t need centralized intermediaries to hold things on the cryptocurrency side. And I think that’s actually improved things. The times it hasn’t improved things was probably the biggest Terra LUNA collapse a few months ago, which was interesting because I think it was a combination of two reasons. One of them was that the mechanism behind Terra LUNA was just fundamentally poor economics.”
The Ethereum creator says that while Terra’s blockchain is decentralized, the team behind it had too much control behind the scenes. Buterin points to Terra’s efforts to accumulate Bitcoin to support its algorithmic stablecoin UST.
“And no one knows what the LUNA Terra team did with Bitcoin or the asset. And they made a lot of promises. And look, they tried really hard to do this kind of very centralized effort to manipulate the market and prop up their coin. But it ended up to fail in the end, right? So I think that story is instructive, because it shows that decentralization by itself doesn’t solve all problems to some degree.”
Regardless of what the Terra team was doing in the shadows, Buterin highlights that the blockchain’s transparent nature allowed some people to predict the cryptoasset’s demise.
“Because if the algorithm is bad, even a completely open and transparent implementation of a bad algorithm will break. But at the same time, it still shows the difference between the decentralized and trustless part of the ecosystem, how many people were able to watch advance what was going on. And many people were able to warn of what might happen.”
You can read the entire interview here.
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