Blockchain This Week - May 14

Carnage on the Crypto Street, Coinbase’s Ominous Report, NFTs on Instagram

Terra’s “Stable” Coin Destabilizes

It all began late last week when unusually high volumes of Terra’s UST stablecoins started getting dumped on Anchor Protocol, a money market, which holds a significant portion of UST circulating supply. The situation swiftly snowballed with people withdrawing their UST investments in Curve, Binance, and other exchanges. Consequently, the price of the stablecoin that is always presumed to be in sync with the US Dollar fell drastically, ending up at almost $0.13 for every $1. 

LUNA in a Free Fall

When UST depegged, its algorithmic pair LUNA, was supposed to absorb the stablecoin’s volatility by being continuously minted in order to burn UST sufficiently enough to bring its price back to $1. This time, however, the pumping of LUNA could not catch up with the pace at which UST was being dumped in the market. At the same time, the massive influx of LUNA tanked its price by over 97% in a single day. LUNA has fallen from a high of $119 a few months back to $0.0001136 yesterday.

UST Fall Out and Conspiracy Theories

Following the spectacular fall of UST, an elaborate blame game was afoot. Some speculate a coordinated attack led to UST depegging. With conspiracy theories afloat, crypto exchanges Citadel, BlackRock, and Gemini denied their involvement in the UST collapse. Others surmise Luna Foundation Guard (LFG)’s massive Bitcoin reserve was alarming to investors who were concerned with the broader market slow down. LFG is a well funded organization that keeps Bitcoin as collateral to protect the UST’s price. 

Crypto Exchanges Halt UST and LUNA Trade

Crypto exchange Binance delisted UST and LUNA pairs on its platform but later resumed trading for UST/BUSD and LUNA/BUSD. Meanwhile, OKX removed spot listings of UST and delisted margin and borrowing services for Terra ecosystem tokens such as LUNA, anchor, and mirror.

Terra Halts Its Blockchain Twice

In the last couple of days, the price of LUNA fell so low that Terraform Labs decided to shut down the Terra blockchain network to allegedly prevent governance attacks. The validators halted the network at block height 7603700 to deploy a patch that would prevent new actors from staking. Later the network was restarted, only to be stopped again at block 7607789. Terra validators claim to have halted the network to derive a plan to reconstitute it.

Terra Founder Proposes To Forget UST

Terra co-creator Do Kwon has proposed an “ecosystem revival plan” for the Terra network that does not involve UST stablecoin. He says UST has “lost too much trust,” and Luna holders have been severely liquidated. Stating Terra’s lack of ecosystem to build back, he proposes resetting the distribution of LUNA governance tokens to 1 billion in order to “preserve the community and the developer ecosystem.” The coins would be apportioned to holders of UST before it got depegged (40%), those who hold UST at the time of upgrade (40%),  and LUNA holders when blockchain was halted a second time (10%). The remaining 10% would be used for future development on the network.

Bitcoin Plunges Below $30K

Another victim of this week’s crypto bloodbath is the world’s premier cryptocurrency - bitcoin. Resulting from the determination of the US Fed to stem inflation and a poorly performing global stock market is the steep price drop in bitcoin. The concern about LFG dumping its bitcoin reserves to stabilize UST also added to the fears. Though eons away from its all time high of $69,000 in November 2021, bitcoin had never dropped to the lows of $26,000 since December 2020. Bitcoin, which slid to $26,350.49, has since pared its losses, and at the time of writing, was worth $29,424.52. Ether, too, lost its $2,000 ground momentarily, but is now back to $2,036.03. 

Slowly Recovering Markets

After a tumultuous week that saw several coins drop by double digit percentage - Cardano (20%), Solana (16%), XRP (13%), and BNB (16%), the crypto market is seeing a slow but definite recovery. Bitcoin and ether climbed more than 12%. It was quickly followed by Cardano’s ADA, which spiked over 40%. Similarly, BNB jumped 30%, and Solana by 25%.

El Salvador’s Awry Bitcoin Bet

Earlier this week, El Salvador’s President Nayib tweeted that the country had bought the dip and added 500 bitcoin worth $15.5 million to its balance sheet. But with the price of bitcoin seemingly in a “chronic dip” since El Salvador first ventured into it, the 2,301 coins bought so far by spending a cumulative $103 million are now worth $66 million.

Coinbase’s Dismal Earnings Report and a Dire Warning

In its first quarter earnings report, the crypto exchange Coinbase reported a quarterly loss of $430 million and a 19% drop in monthly users. What came as a shock to its millions of users is an update on the risks involved in using the Coinbase service. Coinbase stated that if the firm ever went bankrupt, its customers’ crypto assets that are in its custody “could be subject to bankruptcy proceedings.” The users would become “general unsecured creditors” and would have no right to claim their assets.

DLT Trading Platform for Corporate Bonds

LedgerEdge, a trading ecosystem built in collaboration with the world’s leading financial entities, has launched a fully regulated, DLT enabled trading platform for corporate bonds. The LedgerEdge platform is powered by R3’s Corda.

Nvidia Fined for Hiding Crypto Mining Revenue

The US SEC has penalized Nvidia Corporation for its failure to disclose that crypto mining has significantly improved its revenue. Nvidia has agreed to pay a fine of $5.5 million.

GCP Sets Up Web3 Team

Google Cloud is creating a team that will focus on building services for developers of web3 software and blockchain applications. Amit Zavery, VP and head of Google Cloud products, informed his employees that the aim is to make GCP the first choice for web3 developers.

Showcase NFTs on Instagram

Meta is testing its digital collectibles feature on Insta with select US creators and collectors starting this week. The feature includes connecting to a digital wallet and sharing the NFT that gets automatically tagged to its creator and owner. There will also be no fees associated with posting the NFT on Instagram.

Flow’s $725M Fund

Dapper Labs, the creator of the Flow network that bolsters NBA Top Shot NFTs, has launched a $725 million ecosystem fund to attract more projects to build on the Flow blockchain. The investors backing this fund include Andreessen Horowitz (a16z), Coatue, and CoinFund.

NASA Partners With Epic Games

The US space agency NASA is collaborating with Epic Games, to bring a Martian metaverse experience to developers. It includes designing several environments for Martian astronauts that will then be enhanced to give a realistic feel using Epic Games’ Unreal Engine 5.

Nubank Offers Crypto Services

Nubank, one of the largest digital banking platforms, which is also backed by Warren Buffett, has launched crypto services. To begin with, the customers can buy, hold, or sell bitcoin and ether using the bank’s app.

UK Supports Safe Crypto Adoption

The Queen’s speech, written by the UK Government and delivered by Prince Charles, outlined the government’s plans for a safer adoption of crypto. The discourse also narrates the need to create powers to swiftly seize and recover crypto assets with ease.

Meta’s Crypto Chief’s New Venture

David Marcus, the former head of Diem at Meta, disclosed his new venture, Lightspark, which intends to “explore, build and extend the capabilities and utility of Bitcoin.” He says he is currently assembling a team that will work on this Lightning Network. Lightspark has also raised an undisclosed sum of money from the likes of Andreessen Horowitz (a16z) and Paradigm, among others.