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CWC Newsletter #53 (May 9, 2022)

By Taylor Ryker, Partner

Terra Luna Chaos and EOSIO

The biggest news that is hitting the airwaves across the Crypto-verse is the depegging of UST, Terra Luna's algorithmic stable coin. Below, Conor gives an informative walkthrough of what happened over the weekend and showed how a couple dApps on Terra like Anchor Protocol were manipulated to start a run-on UST, similar to a bank run.

Why is this important in the larger crypto-space?

If the UST peg fails to hold its stable-value, all of the blockchain protocols and ecosystems that have bridged to Terra in order to leverage the liquidity between chains to farm for decentralized finance will be negatively affected.

For example, popular blockchain protocol Avalanche recently bridged to the Terra network. In April 2022, the Luna Foundation Guard bought $100 million AVAX to back UST, which was similar to their strategic moves to buy up billions of dollars worth of bitcoin to prop up the UST stable-value.

Now that the depeg of UST may be real, the Luna Foundation Guard has deployed their billion dollar reserves in BTC to spur confidence in UST and the larger Terra network. If the BTC held by the Luna Foundation Guard is deployed to shore up the peg, what is stopping the Foundation from liquidating or loaning out their other crypto assets like AVAX and other cryptos that bridge to Terra?

It seems that it is now a good thing that EOS and its sister chains like Telos, WAX, ULTRA, FIO, Proton, and UX Network are not connected to UST or the Terra Network.

I think that Trimbot, a popular social media influencer in the EOSIO community, said it succinctly in regards to UST:

For the past three years since 2019, the crypto industry has been largely led by DeFi and the insane APR gains of staking and trading particular crypto like stable coins, meme coins, and failing L1 platforms. However, what we are witnessing with the UST fiasco is that these stable coins need to be backed by real assets with real value rather than algorithms whose founders "promise" users and investors that they won't lose their capital.

Crypto needs to be backed by real assets and it needs to have value that businesses and communities can leverage for productivity and profitability.

Which, I think Mark Cuban is attempting to teach his followers when he tweets:

So what are the innovative software applications and programs that Crypto can replace in the traditional finance and tech fields?

EOSIO: Governance & Regulated Tokenization Markets

The EOSIO software is the only tech stack that can allow for high throughput with low transaction costs and energy costs. Its permission structure is the most advanced that allows developers to create robust applications to serve users who are used to scalable applications in Web2. Gaming and NFT platforms like WAX and ULTRA show that EOSIO technology is no joke when it comes to providing an accessible meta verse to its users.

But, how does EOSIO speak directly to what Cuban alluded to in the above tweet?

For EOSIO, I think that Eden on EOS and Chintai provide two great examples of where I think the crypto space is heading, which I think Cuban should know about. Eden on EOS is a DAO-like structure that allows community members to collaborate and coordinate themselves in leading any type of organization.

Last week, Brock Pierce, a Chief Delegate of Eden on EOS and a leading crypto influencer in the world, mentioned in their weekly Delegates meeting about the possibility of leveraging Eden on EOS in order to assist Twitter's goals of achieving a truly decentralized social media platform. Although it is a far-fetched idea that Elon Musk and Twitter will harness Eden on EOS technology, I think that building more applications that will serve businesses and communities like Eden on EOS is far more valuable than another pumping DeFi token.

Chintai is a white-label crypto platform that aims to tokenize any real world asset like carbon credits or real estate for its customers. Considered a type of "Shopify of crypto," Chintai wants to make it easy for any financial institution or company to be able to quickly deploy a regulated token in order to unlock liquidity on a secondary market.

This secondary market for compliant tokenized assets of real value will eventually become Chintai's premier crypto exchange, similar to Binance for cryptos. Allowing for institutional investors to take positions or trade in compliant and regulated crypto markets will bring more stability to the larger crypto space.

In conclusion, if we are witnessing the collapse of UST and potentially the Terra network, users and investors should listen to Cuban's warnings of avoiding cryptos with no real value for cryptos that are building the foundation for Web3.

Remember, Cuban was already burned last summer with his failed investment in Iron Finance, an algorithmic stable coin. We would be wise to heed his advice and begin to shift our energies and capital to ecosystems poised for the long run rather than insane profits in the short-term.

Disclaimer: Taylor Ryker is neither a financial nor legal advisor and holds the digital tokens or cryptocurrencies represented in the content above. This content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained in this post constitutes a solicitation, recommendation, endorsement, or offer by myself to buy or sell any securities, commodities, cryptocurrencies, or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities and commodities laws of such jurisdiction. The opinions expressed in this publication are those of the author. They do not purport to reflect the opinions or views of any of the author’s employers.

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