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Cryptozyme: Centralization Threatens Market Growth! – ₿magazine

TerraUSD Drop Confirms Crypto Winter

Terraform Labs, founded in 2018 by Do Kwon and Daniel Shin, created the Terra blockchain with LUNA as the network’s native token. Terraform then created TerraUSD (UST) as the network’s stablecoin to be monitored by the Luna Foundation Guard (LFG).

UST was backed not by tangible assets, but by algorithms using LUNA to stabilize it. As demand for UST increased, LUNA tokens were withdrawn from circulation to reduce supply and increase their value. As the scheme drew a lot of skepticism and some called it a Ponzi scheme, LFG began to accumulate bitcoin (BTC) in its reserves.

As of April 2022, LFG had 39,897.98 BTC worth $1.67 billion. Unfortunately, three traders exchanged millions of UST for USDC in a very short time, causing the stablecoin to lose its 1:1 peg to the US dollar. As LFG struggles to sell some of its BTC holdings to stabilize UST, a massive crash ensues, causing UST to drop even further.

Eventually, the $60 billion crypto ecosystem collapsed because one company had too much power.

FTX Stock Exchange

The FTX exchange started rather timidly as a platform for buying and selling cryptocurrencies. Except that its founder Sam Bankman-Fried (SBM) also created Alameda Research, a quantitative trading platform. This wouldn’t be a problem if the latter’s balance didn’t consist primarily of FTX’s native token, FTT.

When the news broke on November 2, investors began to worry about the debt burden and solvency of all SBM companies. Binance triggered an FTT selloff on Nov. 6 by announcing that it would sell all of its holdings to FTT, then pulled out of the acquisition after seeing too many problems with the exchange.

This was again a case of centralization as FTX was worth $32 billion and had over a million customers. Within 10 days, the company went bankrupt, and investigations are ongoing in the US and the Bahamas.

FTX is pulling other exchanges down!

Due to the influence and reach of FTX, many other exchanges have been exposed to the FTT token or had deposits on the exchange. Japanese exchange Liquid Global, which was acquired by FTX earlier this year, filed for Chapter 11 bankruptcy and stopped withdrawing funds in crypto or fiat.

Read also Bitcoin, bitgert, ethereum and binance coin – which cryptocurrency performs best in 2022?

Because of this, the price of the FTX token could drop to $0.008!

Atom Asset Exchange (AAX) also suspended withdrawals but quickly distanced itself from FTX. It is one of the largest stock exchanges in the world and uses LSEG technology from the London Stock Exchange Group. AAX said in a statement that the outage was due to an outage by a third-party partner and that it will resume normal operation for all users within 7-10 days.

On Crypto.com, USD and USD deposits and SOL withdrawals have been stopped, although this appears to be a temporary network issue. The same can be said for the Nexo cryptocurrency lending platform, which has assured users that it is not affected by FTX or FTT. Nexo has gone so far as to conduct a real-time audit by Armanino LLP, but many remain skeptical.

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