Unless you have been living under a rock, you’d probably know about the collapse of the Terra Luna (LUNA) cryptocurrency and the USD Terra (UST) stablecoin in the past week. While these cryptocurrencies are not the first to blow up or fail, they are certainly the largest and most spectacular so far! And part of the reason that this collapse is so spectacular is because UST is a stablecoin, pegged at a value of US$1, and used to facilitate other cryptocurrency transactions as well as other decentralised finance (DeFi) operations like lending, borrowing and liquidity staking. The recent events and the reasons for them are reported elsewhere, but what is of greater interest is the promise of DeFi and stablecoins, and whether this time is really different from other currency crisis episodes in traditional finance (TradFi) history.
