Wednesday, October 5, 2022
HomeCrypto NewsMarketTerra Anchor Developer Says Do Kwon Deliberately Raised Interest From 3.6% to...

Terra Anchor Developer Says Do Kwon Deliberately Raised Interest From 3.6% to 20% A Week Before Launch 

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More revelations have continued to emerge about what led to the collapse of TerraUSD (UST), the stable coin linked to TerraForm Labs. 


According to a recent report published by Korean media outlet JBTC and shared by Wu Blockchain, Terra’s Anchor designer disclosed that the original interest rate for the company’s Anchor program was initially designed to pay a lower amount to investors compared to what was launched.

 

However, Do Kwon, the CEO of TerraForm Labs, decided to change everything a week before the initiative launched, as part of an effort to lure more investors to Terra.

Initial Safety Measure

Terra’s core designer referred to as Mr. B in the report, noted that in order to keep UST pegged to the dollar, he and other developers set Terra’s interest rate at 3.6% because all tests above this rate resulted in UST’s collapse prior to the launch.

The core designer added that even the 3.6% ROI was too high; however, he decided to set the interest rate at that amount slightly higher than what traditional financial institutions are paying.

Notably, the rate was reduced because TerraForm Labs, at its initial stage, did not have enough funds to pay out interest to investors.

Kwon Ignored All Warnings

Despite all these considerations and the development of Terra’s Anchor program, the core designer learned a week later that Terra would proceed with the initiative with a whopping 20% ROI.

“Just before the launch, I suggested to CEO Kwon Do-hyeong that the interest rate should be lowered, but it was not accepted,” the developer added.

He further said:

“I foresaw a collapse from the time we designed it. I informed CEO Kwon in advance, but he said he did not listen at all”

Kwon allegedly noted that if the company is unable to pay the 20% to investors, TerraForm Labs would “cut it all,” suggesting that the firm may end the program.

UST fell because the interest rate was too high relative to internal funds, the deficit continue to grow, and the slightest deterioration in market conditions caused it to collapse all at once.

Meanwhile, efforts to get comments from Kwon did not yield positive results.

Not New

This is not the first time Kwon has been accused of being responsible for the collapse of Terra ecosystem tokens. During an investigation last month, a Terra employee disclosed that Kwon proceeded to launch Terra despite the fact that initial testing within the firm failed massively.

It is no longer new that Terra’s ecosystem tokens crashed as a result of the whopping interest rates paid to investors of Terra’s Anchor program.

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Ammara
Ammarahttps://thecryptobasic.com/
Ammara Mubin is a cryptocurrency reporter and trader with vast experience in the industry. Mubin has written several news stories related to the crypto industry, including non-fungible tokens (NFTs), decentralized finance (DeFi), fundraising, mining, etc. Her major focus is covering regulatory events that are capable of shaping the entire crypto ecosystem.

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