Tether and Bitfinex technical director Paolo Ardoino said that the Terra (LUNA) project was not intended to be a scam, but simply “poorly designed” in and of itself.
Ardoino compared the TerraUSD (UST) algorithmic stabelcoin to a “house of cards” that should have collapsed at any moment.
“I don’t know Do Kwon. But let’s give him the presumption of innocence. He created this project with arrogance and the idea that he was right, and many people supported him, certainly for economic reasons. However, the project itself was not right. It was poorly designed, as were many others,” he added.
He also noted that UST was not able to maintain its peg to the dollar because of its high capitalization, as companies did not have enough reserves to support the stablcoin.
“They were in a cascading situation where they were forced to defend parity by selling collateral, and selling collateral caused additional collapses. The additional collapses were pushing them to sell more collateral and so on,” he said.
As for regulation, Ardoino suggested that policymakers first need to clearly define the difference between fully asset-backed stablocoins and those that are mostly collateralized by algorithms.