dokwon

Imagine your local grocery store releases a "store dollar."
They tell everyone: "This thing is basically like cash - it's ALWAYS worth one real dollar."
People start using it because it's convenient. Some even keep extra money in it because, well, it's supposed to be the boring, safe option.
And for a while, it works.

Until one afternoon, that "store dollar" slips. Just a little at first. 97 cents.
The store says, "No big deal! Our system fixes this automatically."
The fix: when the "store dollar" drops below $1, the system offers a deal.
"Give us your store dollars, and we'll give you a different coupon that's worth $1."
The hope is that enough people take that deal, fewer "store dollars" are left floating around, supply tightens, and the price goes back to $1.
... At least in theory.
Because in real life, people don't study the mechanism - they watch the price.
And the moment they see the "store dollar" slipping, they stop thinking about how the system should work and start thinking about how fast they can get out.

That's basically what happened with a stablecoin called TerraUSD.
TerraUSD wasn't backed by real dollars like many stablecoins. It stayed "stable" through a system - automated rules tied to another token, Luna.
When TerraUSD drifted off $1, the system tried to rebalance it through swaps.
And just like the "store dollar," the catch was simple: it worked as long as people believed it would.
When that belief cracked in 2022, the exit broke the system. TerraUSD collapsed. Luna followed. Tens of billions of dollars disappeared.

(Sorry to the crypto vets who just relived the Terra saga for the billionth time. Had to run it back for the newcomers. But here's the part that's new for everyone:)
Yesterday, Do Kwon, the co-founder and face of TerraUSD and Luna, was sentenced to 15 years in US federal prison for fraud tied to that collapse.
👉 Not because Terra failed.
👉 Not because people lost money.
👉 He was sentenced because of how TerraUSD was sold.
TerraUSD was presented as stable. But the system only worked while confidence held. Once confidence cracked, the design didn't cushion the fall - it amplified it.
Prosecutors argued that this fragility wasn't clearly communicated to investors. The real risk wasn't just losing the peg; it was that the whole thing could unwind instantly under stress.
That gap between how safe it was described and how it actually behaved is what turned a market blow-up into a fraud case.

Markets allow losses. They don't allow calling something "stable" when it breaks the moment pressure shows up.
So, the takeaway: if you build something people treat like money, you're responsible for being honest about how it can fail.
And that's the line this sentence draws.
Another crypto legal case closed.

Source: Binance News / #BitDegree / Coindesk / Coinmarketcap / Cointelegraph / Decrypt

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