Terra Implosion

Just curious if anybody in Peercoin community has any thoughts generally or specific to Peercoin.

I’ve never even heard of Terra before today.

There is a good tl;dr on what went down with the entire Luna circus since inception until today:

In essence, yet another Ponzi scheme that depended on a perpetual bull market. When the music stopped, it fell apart.

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Maybe Do Kwon is Jordan Lee :thinking: :sweat_smile:

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Does he have the type of personality that suggests he knows everything and is always right, and if the peg fails it’s only because you failed to follow his instructions?

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From what I have seen I would say yes.

Sure, lots.

A) keeping reserves. This is a key one for something like a stablecoin, but applies equally well to something like the Peercoin Foundation. You can do all the theoretical calculus, but at the end of the day it still seems Bitcoin, despite its volatility, just has the least counterparty risk. Yet, we see an entire ecosystem crushed when there is a hiccup.

B) hiccups are inevitable. Here, a big project went in and went out and it decimated the reserves. That happens, you get a new customer or make a new contract or deal. The variability is the rule, not the exception, in usage of whatever function we create.

C) no one does seeded auctions. Honestly, I tauted this during Nubits times, and it never caught on. But if a stable coin implemented this, it would be game over. But good luck expecting anyone to actually take real stable-coin methods seriously…

C) corellary, wtf, trading 1:1 stable to stake, wtf were they thinking? That’s so easily exploitable. Seriously, does no one read these posts? wtf.

D) Marketcap != real project. I could state this a thousand times and it still wouldn’t seep through the blood-brain barrier.

E) Does blockchain even matter if your constructed concept is so centralized that it depends on a single line of logic that can be exploited? UST=Terra, destined to fail.

F) Turns out economics are complicated, who knew? Seriously, bitcoin is doomed to fail by deflationary economics, and it’s the same thing as terra but in slow motion. Cite me.

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Can you expand on F?

If we assume the other points, then it describes terra failing by virtue of a rapid expansion and contraction of its economy, causing a run on the bank. With Bitcoin, it would be a glacial expansion and contraction due to the inflation schedule. Here, i am using the concept that inflation occurs naturally during periods of expansion and deflation occurs during periods of contraction. Because the system is tailored that way, it will feel like contraction even if the economy remains steady or even grows. As such, the deflation will become a burden that the ecosystem cannot bear over long periods of time.

Please be aware that we have not yet hit the deflationary age of bitcoin. It has had a high inflation rate up till now, objectively speaking.

Does the deflationary period start when the mining rewards end or is there more to it?

By economy do you mean the bitcoin economy or the economy at large?

The block reward represents inflation of the entire system, whereas transaction fees in the Bitcoin network are simply trading coin for the PoW service. As such, when the block reward ends, we can see this as a transaction fee economy with 0% inflation. In real economies, this corresponds with a ‘contraction’ period.

So you predicting a Luna type collapse in a hundred years? Or does it begin before that?

Well, in ‘slow motion’. Luna was a fantastically quick snowball, there really is nothing like how stupendously it failed in all of crypto history. That’s one interesting takeaway too, automating the economics can lead to astonishingly rapid market responses. Bitcoin doesnt have such automation, and its econony moves more glacially. The winding down will take some time, but the inflation schedule is already set to wind down to negligible % gains on the supply in the next ~10 years. It is anyone’s guess how things will actually pan out, but eventually people will see the writing on the wall. Again, nothing anywhere near as spectacular as Luna, that was just a superb performance.

I suppose the counter argument to this comparison, because it was somewhat flippant, is the Luna failed because of a rapid inflationary period following a long term deflation. This is, of course, how counterparty business works (slow during customer accumulation, quick when they decide to leave). Bitcoin is not a counterparty, it is more like a commodity, and that is where the comparison to gold and so on comes in. However, the world moved away from the gold standard of commerce for a reason.

We’ll have to see, but I dont imagine it taking anywhere near 100 years. In 6 years, Bitcoin will be <0.5% inflation per year, down from 1.7% now. It will be a different epoch entirely, as we have been in a heavily inflationary crypto-economy up till now.

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