Tether CTO, Paolo Ardoino believes Terra was only a poorly designed castle of cards that has a propensity to collapse.
Paolo Ardoino, CTO of Tether and Bitfinex, stated that the Terra (LUNA) project was not intended to be a rug pull, but was simply “poorly designed.”
In response to the Terra ecosystem’s market-shattering crash, Ardoino compared TerraUSD (UST), its algorithmic stablecoin, to a “castle of cards” that could collapse at any time.
Many in the crypto community have cited a long list of dubious comments/actions by Terraform Labs founder Do Kwon, raising concerns about his actions. It has also been reported that Kwon worked on a previously unsuccessful algo-stablecoin project called “Basis Cash.”
Ardoino made the remarks while appearing on the Reimagine Unplugged podcast this week, which is produced by Reimagine, a media company that focuses on Web3 content and events. The CTO stated that Kwon’s erroneous sense of self-worth was a major issue:
“I don’t know Do Kwon. But let’s give him the benefit of the doubt. He created this project with arrogance and with thinking that he was right and many were supporting him, of course, probably for economic reasons, but was not per se, a rug pull right, it was a project that was poorly designed as many projects are poorly designed.”
“That there was like a castle of cards and it could fall, but he couldn’t say it because it would have fallen much faster if he had.” And, once again, it was clear to me, as it was to many others, that it was a bad idea,” he added.
The CTO went on to say that the UST had grown too large to maintain its peg because its collateralization (primarily in Bitcoin at the time as it attempted to build reserves) was insufficient to support the stablecoin but was “large enough to crash the market even further.”
“They were basically in a cascade situation where they had to defend the peg, so they had to sell the collateral, and selling the collateral was causing additional crashes, and these additional crashes were pushing them to sell more or collateral, and so on,” he explained.
When asked about the regulatory landscape for stablecoins in the future, Ardoino suggested that policymakers first define the difference between stablecoins that are fully backed by assets and those that are primarily backed by algorithms:
“The first step, in my opinion, is the proper categorization of stablecoins; for example, Terra UST is an algorithm stablecoin, whereas Tether is a centralized stablecoin. So two distinct beasts with two distinct assurances, two distinct backings, and so on.”
