LUNA Million Dollar Bet: Electronic Cash or Ponzi Scheme

After days of bickering, Terra founder Do Kwon and LUNA critic Sensei Algod finally made a real bet.

On March 14, Do Kwon made a bet with Sensei Algod on the social platform whether the price of LUNA could exceed the current price of $88 in one year. Both parties invited the big encryption VCobie to witness, and each sent a stable ratio worth one million US dollars to Cobie’s designated address. At present, the funds of 2 million US dollars have been received, and the two parties have confirmed that the betting contract is effective.

How did this bet start? Golden Finance will take you to find out.

The origin of the bet

According to DeFi Llama, Anchor is TVL’s largest DeFi protocol in the Terra ecosystem and the fourth largest DeFi protocol among all blockchains.


Anchor Protocol promises an ultra-high yield of 19.5% (revenue mainly comes from Anchor’s native ANC token), amassing a total value locked (TVL) of $12.9 billion, of which over $10 billion in assets are UST.

Anchor’s ultra-high yield has greatly increased the demand for UST, and according to the mechanism of UST, it is necessary to generate UST by burning LUNA, thereby driving the price of LUNA to rise.

LUNA, UST and Anchor are all under Terra.

Many LUNA critics argue that Anchor’s high yields are unsustainable and could threaten the Terra ecosystem.

On February 25, two crypto investment firms, Polychain Capital and Arca, launched a proposal at the Anchor Governance Forum, proposing to reduce the Anchor Protocol yield: for depositors of 1,000,000 UST, the annual interest rate of the first $100,000 is 19.56%, and the next 40 The APR is 17.50% on $10,000 and 10.00% APR on the remaining $500,000.

Polychain and Arca are also proposing to cut two higher-tier deposit amounts every 30 days, to be implemented over a year and a half from April 1.

As Anchor’s yield is ready to be lowered, the unsustainable voice of LUNA is revived, among which Sensei Algod is more active, and he publicly claims that UST/LUNA is a Ponzi scheme.

Sensei Algod says UST/LUNA is the reason for a Ponzi scheme

Sensei Algod once tweeted to explain why he thinks UST/LUNA is a Ponzi scheme:

UST is stable through a simple swap mechanism: 1 UST can be exchanged for 1 USD of LUNA at any time

If the value of UST falls below $1.00, a buyer can make a profit by buying UST and selling it at $1.00 using the swap mechanism. When buyers do this, demand for UST causes the price to rise again until UST hits $1.

So basically 11.7 billion UST is basically backed by LUNA orders, and in the best case, it can now maintain a scale of 1-2 billion. Currently, they are driving demand with air eliciting a fixed APY of 20% (the yield from UST in the Anchor protocol), which is unsustainable. The longer the time, the more pressure on LUNA.

What Lunatics is expecting is that demand will continue to outstrip supply indefinitely, and once oversupply, people will panic and start dumping UST heavily to redeem LUNA and exchange LUNA for usdt. Does this remind you of Ponzi.

This is different from what is possible, with a 5x increase in UST supply. It’s easy to absorb a few hundred million dollars in selling pressure, but Luna’s liquidity isn’t enough to absorb billions.


UST/LUNA is basically a glorified titan Ponzi scheme, at least iron is 80% collateralized.

In the event of a black swan event or oversupply, it will be a race to the bottom and LUNA orders will not be able to withstand the billions of dollars of selling pressure from UST.

People are basically betting that the Terra ecosystem gets big enough to host UST. Best case is they restrict UST so that it can still be managed. But in theory, they have the potential to issue hundreds of billions of dollars backed by billions of dollars in real liquidity.


open bet

After several rounds of debate, on March 13th, Sensei Algod disclosed @Terra founder Do Kwon, LUNA supporter CryptoHarry, DelphiDigital Ventures investor José Maria Macedo: Who is willing to use $1 million to bet that the price of luna will be higher than now in one year Low?


Do Kwon immediately followed up and said,


Sensei Algod then tweeted that LUNA is Bitconnect in this bull market. Print and distribute 20% of the APY yourself, once the APY declines, the demand for LUNA will also decline, and the final multi-billion-dollar UST will form a downward spiral.

Made a million today. It took a whole year for the Luna people to realize that it was a Ponzi scheme, which would eventually put a lot of selling pressure on Luna.


Sensei Algod said he sent a private message to Do Kwon to confirm the bet.


Do Kwon directly asked for a public bet, and found encrypted V Cobie as a middleman to host the $2 million bet, and then each sent the $1 million bet to Cobie’s address:



According to Terra’s official documentation, the goal of the algorithmic stable currency UST is to become a true peer-to-peer electronic cash that can be used by people in real business scenarios.

After Do Kwon’s bet was confirmed, Do Kwon tweeted the following as if to cheer himself up.

“A $10 billion UST with BTC reserves will usher in a new era of bitcoin-standard currency. UST is peer-to-peer electronic cash that is easier to spend and hold.”

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

Like (0)
Donate Buy me a coffee Buy me a coffee
Previous 2022-03-14 10:16
Next 2022-03-14 10:20

Related articles