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1/ Short thread on Terra. An obvious criticism but not one I see discussed a lot.
So, an oversimplification, sure, but...
is on fire. Why? demand.
2/ Why the UST demand?
Markets have been risk-off for ~3 months now and people moving to stables.
3/ When moving to stables, why not pick the one with the highest yield? That's @anchor_protocol@terra_money
~20% is nearly double anywhere else
4/ However, @anchor_protocol and this 20% have proven to be unsustainable. Anchor reserves tanked to near zero in the last ~3 months. That timeline sound familiar?
5/ But then LFG adds 450M to reserves to keep it going.
Essentially a bailout. "Printing new money" to keep the system going. Kicking the can down the road.
I understand trying to bootstrap adoption BUT obviously, this cannot go on forever.
Nor why should we want it to?
6/ Sure the Terra ecosystem is legit. I am a fan. I think a truly decentralized stablecoin is number 2 in importance behind
But let's not get ahead of ourselves with terraluna
7/ They are subsidizing users. Also known as buying users.
The real test of adoption is when the 20% goes away and it has to compete on its own. Against the rest of the market.
@anchor_protocol money stick around if interest is closer to 12%? 10%? 8%?
8/ Every YieldFarming degen suggest not. They'll move on to the next thing.
You don't think would have 3x the market cap/TVL if it offered 20% interest on DAI?
@anchor_protocol and UST aren't novel, they're just well funded with backers.
9/ Maybe someone can convince me otherwise.
Anchor is literally ~50% of Terra TVL. Meaning half of the blockchain simply exists to earn a temporary yield.
10/ Let's discuss Terra and Anchor once it actually stands on its own two feet.
Without cash injections to maintain the peg and reserve "top ups" to continue to prop up an unsustainable model.
11/ Finally, while I'm being harsh, I think it's necessary. We want criticism and adversarial thinking in crypto.
I think comparing Terra to other blockchains right now is a bit analogous to when a new dApp launches a yield farming incentive
12/ Again, I'm not anti-Terra or anything. Just want to call a spade a spade. And I commend the recent BTC purchase to defend the peg. I think that's awesome.
That's way more defensible than turning to Daddy @stablekwon anytime the peg runs into trouble
