A rising star that was ranked among the top ten Cryptocurrencies collapsed in a matter of a few days shocked the world. It was every investor’s nightmare, as Terra’s native token, Luna fell by 97.5% in a few hours from $80 to a mere 0.0004 cents in a few days.
For those that invested in Luna and the Terra ecosystem, my heart goes out to you in these difficult times. It is also my regrets and apologies that I have recommended Anchor protocol as a passive income stream before. Even deep research and conviction did not help in this situation.
To understand what caused the collapse, we have to take a look at the mechanism in place.
The initial cause of collapse was due to the depegging of Terra’s stable coin, also known as UST. Stablecoins are usually pegged to a dollar in a 1:1 ratio. However, UST uses algorithms for the...