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Could Terra become the next ghost chain?

June 2, 2022, 7:41 PM UTC

Hi, Ledger readers. Marco Quiroz-Gutierrez here, filling in for Declan.

Last month, algorithmic stablecoin TerraUSD (UST) crashed and burned in one of the largest crypto bankruptcies ever. The billions of dollars that investors had put into the coin and its sister token, Luna, evaporated after TerraUSD failed to maintain its theoretical peg to the U.S. dollar.

But as with many normal business bankruptcies, the Terra blockchain has gotten another shot—sort of. And so far, it’s been very rocky.

Terraform Labs, the company behind the mess, created a successor blockchain, Terra 2.0, after a community vote. It also debuted a new cryptocurrency for the blockchain, confusingly also called Luna, and gave millions of it away on Saturday to some of the people who had lost money in the original collapse.

Almost immediately, Luna’s value dropped 80% from its initial price of $17.80 to about $5; as of Thursday it had rebounded slightly to around $7. One problem was that several major crypto exchanges didn’t support trading of the new token. Moreover, when Binance, the largest crypto exchange, did list the new Luna, it did so through its “Innovation Zone,” a place for high-risk tokens. That’s hardly a vote of confidence.

Many crypto traders have criticized Terra 2.0 and its Phoenix-like resurrection because they fear it will fail just like the original Terra blockchain and leave investors high and dry. And based on Luna’s volatile trading, some of them say the new token is destined to meet the same fate as its predecessor.

Omid Malekan, a Columbia Business School professor, told Fortune that the new Terra blockchain will struggle to attract users. What lured people to the original was a lending and borrowing application called Anchor Protocol that paid out nearly 20% in annual interest on any deposited funds. The other big draw was TerraUSD, which was advertised as being fully decentralized with no reliance on traditional banks. The new Terra blockchain lacks both double-digit interest payments and a decentralized stablecoin, and according to Malekan is, well, just another blockchain among many.

“I think the new Terra is really going to have an identity problem,” he told Fortune.

Malekan, author of the book Re-Architecting Trust: The Curse of History and the Crypto Cure for Money, Markets, and Platforms, said Terra 2.0 is already at a disadvantage in that it’s new and doesn’t have as many users as other blockchains such as Ethereum. Terra 2.0’s best bet is to find a use case for its technology, he said.

“I think it would need to find a niche that is not already being served by all of the other competitors out there,” he said.

Otherwise the new Terra blockchain may become a “ghost chain,” or a blockchain that exists but with little to no activity. This phenomenon has happened before, Malekan said, such as with the blockchain supporting Litecoin. This early competitor to Bitcoin was once a thriving project, but as of Thursday its underlying blockchain recorded less than $1,000 in fees, according to, which tracks the transaction fees on different blockchains. Fees are collected whenever users transact on a blockchain and are a good gauge for how much the blockchain is being used, Malekan said.

If Terra 2.0 follows the path of other ghost chains, it could continue to exist though be irrelevant, Malekan said.

“I think the odds of survival are high [for Terra], but the odds of it thriving and actually becoming a big part of the overall crypto industry are low,” he said.

Marco Quiroz-Gutierrez



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In an interview with Fortune’s Taylor Locke, Binance CEO Changpeng Zhao addressed concerns about the crypto exchange supporting the new Terra blockchain. Zhao said that the Terraform Labs team poorly handled the TerraUSD collapse last month, saying “The [Terraform Labs] team didn't respond quickly enough.” Binance listed Terra’s new Luna 2.0 token on Tuesday, and it almost immediately jumped 39% to around $8 before falling back to the $6 range on Wednesday; it traded at $6.49 Thursday morning. Zhao told Fortune that although some had criticized Binance’s decision to list the token, ultimately the exchange has a lot of users that hold the coin, and “we still need to take care of those users,” he said.

From the article

There was a small period where we suspended trading [of UST and old Luna] only for a couple of hours [on May 12]. This is when the Terra blockchain was suspended [on May 12], and we said, “Well, if the blockchain is no longer working, we want to suspend trading so that we don't have a lot of weird speculations, etcetera.” 

Even then, we got a lot of user complaints saying the guys who bought know that they took the risk to buy, even at low prices or high prices. If we stop the liquidity, then it causes problems for them. They could no longer trade. So in the end, we had to take the neutral stance and just provide a marketplace with very strong risk warnings.


21 Billion

Sam Bankman Fried is following in the footsteps of Bill Gates and Warren Buffett, pledging to give away his estimated nearly $21 billion fortune over his lifetime. The 30-year-old billionaire, who rose to prominence as the CEO of crypto exchange FTX, has previously said he shuns luxury. Bankman-Fried reportedly drives a Toyota Corolla and lives like a college student to make as much money as possible as fast as possible so he has more to give away, according to Bloomberg. The Giving Pledge was created by Gates, his ex-wife and philanthropist Melinda Gates, and Berkshire Hathaway CEO Buffett. To date the pledge has more than 230 signatories from 28 countries. Coinbase CEO Brian Armstrong signed on in 2018.


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(Some of these stories may require a subscription to access. Thank you for supporting our journalism.)


This week it seems like everyone is talking about airdrops. Even if the only airdrop you’ve heard of is the iPhone feature, it’s an easy concept to grasp. Airdrops are when crypto projects give out free cryptocurrency or NFTs to a select group of people. They’re a way for new projects to build up hype in the hopes that the people who get the free stuff will interact with the project. This concept was used recently to give away millions in ApeCoin, a new crypto tied to the Bored Ape Yacht Club NFT project. More recently, those who lost money when Terraform Labs’ TerraUSD and Luna tokens collapsed last month got an airdrop of Luna 2.0 tokens when Terraform Labs created a new Terra blockchain last week.

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