In The Defense Of Terra

An unbridled ecosystem with potential unlike any other, but like Icarus, they flew too close to the sun.

The collapse of Terra was an event that sent shockwaves throughout the crypto ecosystem. 50 billion dollars, evaporated in the span of days. While it’s yet another name added to the list of failed algo-stablecoins, I mourn for its loss, for while the design was flawed, the goal was of a pure heart:

Terra was aiming to be programmable money; I would describe it as a protocol that was well positioned to onboard the next million users to Decentralized Finance.

While I know naysayers will say that TVL on Terra was a meme, that people were on it just for Anchor - I don’t disagree.

But that’s not the point. The point is that Terra aimed to build something no other Layer 1 focused on. I invested in Terra despite knowing the flaw of its algorithmic design because I truly believed that if it was able to overcome its tribulations, it would go on to become a very successful L1.

Every other L1 is simply competing with Ethereum’s blockspace, and their narratives are all the same - to be a “cheaper, faster, more scalable” blockchain compared to ETH. While I do hold some AVAX because I like the idea of subnets, I’m not sure how these coins will fare when Layer2 becomes more popular.

In the scalability trilemma, most blockchains have to choose a side, because no one can have all 3. Ethereum certainly has side C, while most competing L1s choose side B.

But when Ethereum becomes modular, what happens to those Layer 1s? Second-order evaluation leads me to think that for these L1s to survive, they have to offer a niche that can’t be found on Ethereum - in Avax’s defence, it’s the idea of having an entire subnet dedicated to your application. However, even this idea is being contested with ETH L2’s advancements.

But Terra offered something else entirely - they offered to be programmable money, to be the vanguard of the upcoming monetary revolution, to onboard the next million users to De-Fi.

UI has to be the most important element in this process - after all, that was the whole narrative for GameFi - it would abstract away complicated De-Fi elements and leave users with a clean and simple interface, onboarding the next wave of retail.

Terra certainly did its part on that front. Below is an image of Alice - an app built to allow users to pay using UST.

I don’t believe I’ve quite seen anything like it, with its slick and clean design. It certainly does its job at abstracting away De-Fi, and (IF) UST was backed by something other than a mechanism that worked in theory, I would have loved to watch it grow.

If you’re still not convinced, let’s compare money markets - Anchor and Compound:

Let’s say you’re new to De-Fi - that while you’re familiar with the idea of money markets, you don’t quite know what to expect. I would think that you’d find Anchor’s dashboard way easier to navigate than Compound’s one.

Indeed, I believe we have lost a project with tremendous potential. While I would love to see other L1s try to do the same, I believe it’ll be quite hard to follow in their footsteps - you can fork the idea, but there are 99 other different factors that also led to Terra’s success; in the end, it was the most well-positioned out of the other L1s to truly lead the next wave of retail into De-Fi.

Well, that’s all from me. It truly is a shame, but it is what it is. I do not condone the actions of Do Kwon, but as I said, I do find the whole foundational thesis of Terra one that’s worth defending.

Oh, and what do I think of Terra v2? Well, I certainly have my doubts - I do hope that Terra continues to build towards its original dream, but the idea of forking Terra similar to ETH and ETH classic? It just doesn’t sit well with me.

But who knows, just like how ETH managed to prevail in the end, maybe Terra v2 will do the same. We’ll see.