JAKARTA – The Terra collapse is the hottest topic in the crypto industry during 2022. Commenting on the matter, the founder of Avalanche (AVAX), Emin Gun Sirer, explained the influence Terra has had on other blockchains and the impact of its collapse on cryptocurrencies broadly.
Reporting from CryptoPotato, in an interview with Steven Ehrlich of Forbes, Emin Gun Sirer expressed his thoughts on Terra's massive growth last year and the collapse of UST – LUNA.
“Terra's situation is very regrettable. As you know, Terra started a little bit before we (Avalanche) did and it (Terra) is just developing. That ends up attracting a lot of money and a lot of growing space that will go to AVAX or maybe Solana or some other next-generation high-speed chain to start going into LUNA,” said Sirer.
He explained that projects like Avalanche were hampered by LUNA's rapid growth. This, in turn, caused many other networks to emulate developments in Terra. However, his team avoided such attempts.
“We were smart enough to realize we couldn't do this. There are many reasons why not, but to run such a stable coin with such a feedback loop, it takes a very large team with operational capabilities to try to maintain that peg. We know that we don't have that capability," he added.
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Prior to Terra's demise with stable coins TerraUSD (UST) and Terra (LUNA), Sirer realized that Terra's growth should not be ignored. He said it decided to partner with Terra through a token exchange.
Furthermore, Sirer explained that it is exchanging US$60 million worth of AVAX for LUNA and UST tokens in a bid to form a partnership with Terra. He realized that it was a losing gamble.
AVAX founders judge that all their LUNA tokens are essentially zero, but they can redeem part of their UST for dollars. Despite all of the above, he also said that this poses no economic challenge to Avalanche as the numbers are insignificant and can be “cleared in a day.”
Furthermore, he admitted that his party had held talks with the Terra team regarding the ownership of AVAX which was still held by the Luna Foundation Guard (LFG). Sirer explained that it was "the most valuable thing they hold." Therefore, he concluded that Terra would not sell their AVAX holdings.
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