ViaBTC Capital｜An egg is over under the nest, where is the Terra ecological project?
thunder on the ground
In April 2022, Terra was still a public chain with a market value of $41 billion and many beautiful visions. However, in just one month, its native algorithm stablecoin UST has been de-anchored due to capital manipulation and imperfect mechanism, causing Terra’s market value to plummet from $41 billion to $1.2 billion (as of May 17th ), a drop of as much as 97%. When UST broke off its anchor, its TVL also collapsed from $21 billion to $300 million in just one week. Is there an egg under the nest? The ecological project that used to be backed by the big Terra tree to enjoy the shade has fallen from $21 billion to $300 million in TVL within a week after the UST broke off its anchor. How does Terra’s ecological project find a breakthrough? Is it survival of the Jedi, or just disappear?
In a previously published article “The Fall of the Luna Goddess” (https://www.newsbtc.com/news/company/viabtc-capital%EF%BD%9Cthe-collapse-of-luna/), we have After sorting out the whole crash and its subsequent impact, in this article, we will focus on sorting out the project situation of the Terra ecological project after the incident, and whether the team has actively solved the problem, and see where they are going.
Where is the Terra ecological project going?
Astroport is the top DEX on Terra. It only supports the Terra chain and is deeply bound to the Terra ecosystem, so the main transactions are Terra’s ecological projects. Therefore, Astroport’s TVL and Trading Volume were greatly affected by the explosion.
For TVL, according toDefillama.comAccording to the data, Astroport’s TVL scale was around $1.26 billion on May 9, before the UST thunderstorm, but it followed a cliff-like decline, and TVL dropped directly to $23 million on May 15. TVL down more than 50 times. The decline in TVL also directly reflects that not only LUNA and UST have plummeted in the Terra ecosystem, but other projects such as Mirror, Anchor, and Astroport have also experienced halving and halving. In terms of Trading Volume, according to Coingecko’s data, Astroport’s trading volume was $350 million on May 9, surged to $1 billion on May 11, and then plummeted to $16 million on May 13. It’s 1/20 before the explosion. This reflects that at the beginning of UST’s de-anchoring, various trading users who hope to buy the bottom or speculators who use the UST mechanism to arbitrage into the Terra chain to trade, making the Astroport platform’s trading volume more active than usual in the first few days, but soon In a bottomless black hole, it became dead silent.
Astroport has never disclosed the team to the public before, but for this incident, they issued an announcement on the 11th, saying that they hope the community will discuss the next project development and how to save the Terra ecosystem. Due to the deep ecological binding of Astroport and Terra, liquidity is its best moat. Once the liquidity is lost, in the DEX arena with low technical barriers and fierce competition, even if Astroport migrates to other public chains, its market competitiveness will not be optimistic.
Anchor is the largest stablecoin lending project on Terra. It provides depositors with an annualized deposit rate of up to about 20% through loan interest and pledge income. Lenders can pledge LUNA, ETH and other assets to lend UST. As a key part of Terra’s ecosystem, providing users with a stable income of about 20% is one of the reasons why Terra’s TVL can grow rapidly.
Before UST was de-anchored, the lending rate on Anchor was abnormal. The lending rate changed from positive to negative. The system lowered the interest to encourage users to pledge LUNA and other assets to lend UST, but the actual borrowing rate was still at a relatively low level. level. When UST is de-anchored, the most intuitive impact is reflected on Anchor, and users have withdrawn their UST deposits to exchange. In addition, as the price of Luna plummeted, bLuna was continuously forced to liquidate, further falling into the trap of cyclical decline. The TVL in the system fell from 14 billion UST to 1.39 billion UST (as of May 16), showing a cliff-like decline.
In multi-chain deployment, in addition to bLuna, Anchor supports bETH, wasAVAX, bATOM, and bSOL. However, the pledged assets of other chains also began to be gradually redeemed after UST was de-anchored. As of May 16, bETH TCV (Total Collateral Value, total collateral value) was $59.65M, wasAVAX was $5.05M, and bATOM was $2.21M , bsol is $3391. The massive redemption of assets reflects investors’ lack of confidence in the subsequent restart of Anchor.
After the UST de-anchoring incident, the official did not immediately issue an announcement to stabilize investor confidence, but only tweeted that the blockchain had been suspended and called on users to stop interacting. At the same time, the official Discord server is locked, and users can only leave comments on Twitter. In response to the UST de-anchoring incident, considering that the team behind Anchor is Terraform Labs, there may be no time to consider the subsequent development channel of Anchor.
The author believes that the contradiction of Anchor is that the actual borrowing rate is too low, and most of the funds cannot be used. Instead, the reserves are gradually consumed, resulting in the final loan imbalance. In March, the Anchor community also sought other solutions, such as adjusting the deposit APY to a semi-dynamic interest rate, upgrading to Anchor v2, and using auto-compounding pledged derivatives as collateral. However, due to the impact of UST’s de-anchoring, Anchor’s middle road collapsed. If Anchor is to continue to do so, it first needs to regain investor confidence, and then improve the product logic to break the situation of making ends meet.
Mirror Protocol is a Terra-based decentralized synthetic asset trading platform where users can trade synthetic assets such as mTSLA that are anchored to Tesla’s stock price. Like Anchor, Mirror was once one of the important applications for UST to expand its application scenarios. Beginning at the end of 2021, Mirror was caught in the rumors of being investigated by the SEC, and TVL also declined all the way. This UST incident once again caused a heavy blow to Mirror. According to Mirror’s product mechanism, it obtains real-world stock prices through oracles, and then changes the pledge rate of collateral to guide the synthetic assets on Mirror to track real-world asset prices. However, the synthetic assets on Mirror are all priced and traded in UST. As the de-anchoring of UST becomes more and more serious, the price of synthetic assets on Mirror also deviates significantly, with a premium of up to more than 40%.
The team behind Mirror is Terraform Labs. The official tweet has no latest news since May 5, and has not responded to the recent thunderstorm incident. Mirror’s Discord, on the other hand, has been temporarily unavailable since May 11. Due to regulatory pressure and the de-anchoring of UST, Mirror may not have much action in a short period of time.
Mars is a lending protocol other than Anchor in the Terra ecosystem. It is also a joint project of the Terraform Lab official team, Delphi Labs and IDEO CoLab. Compared with Anchor, Mars’ goal is to provide mortgage lending services for more types of tokens, and in order to expand the loan utilization rate, it also innovatively provides functions similar to credit line to other protocols that grant credit to the protocol (such as Apollo, which is an Astroport-based revenue strategy platform).
In this UST de-anchoring event, because most of the TVLs of the Mars protocol are users participating in itsStages of LockdropThe UST was put in at the time, so the TVL loss is relatively small compared to the LUNA heavy-holding agreement (the current UST value is about 0.15 US dollars). And since the protocol has not yet been fully launched, there are not many bad debts generated by pledged lending. At the same time, when UST began to de-anchor, the protocol immediately stopped the lending function. The existing UST liquidity providers have also been dealt with urgently. Previously, many people in Lockdrop’s UST lock-up were locked for 3 to 15 months. The project party released the lock through emergency multi-signature, and users can freely withdraw the lock. UST of the warehouse. From proposal to execution, the action is very fast.
However, it is worth noting that the act of unlocking UST is, to some extent, a reflection of the project party’s lack of confidence in reconstruction. Because according to Terra’s official compensation plan, UST holders will be allocated new LUNA tokens, but Mars has allowed users to redeem UST tokens that should have been locked until next year (according to the average lock-up time), which also means Withdrew the right to use the new LUNA tokens allocated to these USTs for a year or so. This dilutes the underlying value support of MARS tokens, and it also means that the project party may be considering giving up or switching to other directions.
Overall, as a lending protocol deeply bound to the Terra ecosystem, the future of Mars is full of unknowns and difficulties. And since the project party is Terra Lab itself, the possibility of protocol chain migration can also be basically ruled out. The only thing worthy of recognition is that in this crash, we have seen the rapid decision-making and action of the Mars team. Compared with most Terra projects, Mars has done a very good job in handling the crisis and pacifying and compensating the community. .
On May 10, Mars announced that it would stop lending services.
On May 13, Mars counted bad debts and said that Delphi Lab, one of the teams behind it, would cover the bad debts.
On May 13, Mars released the previous lockup.
Nexus is a revenue strategy protocol. The main strategy is based on Anchor’s bLUNA products (a small part is bETH and wasAVAX). The core technology is to use the oracle machine to front-run Anchor’s liquidation mechanism, so that users can use the largest possible amount. The loan ratio is mined, and the position will not be liquidated.
Due to the de-anchoring event of UST, LUNA is nearly zero, and the TVL of the bLUNA strategy of the Nexus protocol is also close to zero, leaving only bETH and wasAVAX and some TVL. However, due to the panic of users fleeing, there is not much left of the overall TVL.according toDefillama.com data,Its peak reached $153m, and now it is only over $500k.
Even more unfortunately, in the UST de-anchoring incident, the Terra public chain network also experienced some problems, which caused the Nexus nodes to lose synchronization with the main network, making the explosion-proof warehouse mechanism invalid. In the protocol strategy, approximately $600,000 of assets were liquidated.Immediately after the incident, the team carried outTechnical analysis of reasons and drafting and proposal of compensation plans.
For the Nexus protocol, the UST incident started the entire project from almost zero. However, due to the innovative technology and design of the project itself, and the underlying lending protocols like Anchor have good alternatives on other chains, the team will have great opportunities to redeploy other chains in the future and make tokens. migration. Nexus itself is not an official Terra team project, and there is no need to continue to carry it in the Terra ecosystem. Judging from the current team’s announcement, the team itself is still discussing the future possibility of the project. The overall feeling is that it wants to continue to do it, and has no intention of settlement and dissolution.
On May 12, Nexus posted that the nodes were out of sync due to Terra network issues.
On May 12, the day of the liquidation of Nexus, the cause of the event and compensation plan were released.
On May 15, Nexus said that future development is still under discussion, opening up a variety of possibilities.
Orion Money is a cross-chain stablecoin bank on Terra, which converts stablecoins on different chains into inventory assets to participate in the fixed income of stablecoins on Anchor protocol. Orion Money was first launched on ETH and later deployed Terra, BSC and Polygon.
Orion Money’s TVL also experienced a cliff-like decline, dropping from nearly US$75 million to US$15.96 million. As of May 16, there were still 4.95 million UST assets, and most of other stablecoin assets have been withdrawn or the remaining assets are relatively small. small portion.
To their credit, the official team tweeted to stabilize investor confidence as soon as UST broke down, indicating that they are already discussing how to solve it. And since the UST de-anchoring incident, the team has been actively responding to solve the problem to ensure that users can withdraw their stablecoins with minimal losses. On May 14th, the team issued a document to help users withdraw UST faster, and also reminded users that there may be a potential new Luna airdrop. On Telegram, the team members disclosed that they had participated in Terra’s early investment and are currently at a loss, and the orion of the team has not been unlocked, hoping to give investors confidence.
Because the project is developed based on the Anchor protocol, it only transfers stablecoins from other chains to Terra, which is more like an accessory for Anchor, and has no technical barriers in itself. If Anchor cannot be deployed, Orion Money can only find another way out, or shift the focus of the project, or seek similar Anchor projects on other chains for redeployment.
PRISM Protocol was once considered Terraform Labs’ most innovative product. Through the PRISM protocol, users can split their assets into costs and benefits. At present, the protocol only supports the split of LUNA, and LUNA can be split into pLUNA (representing principal) and yLUNA (marked return).
Currently, the price of LUNA token is close to zero, and the PRISM protocol has also been hit hard. According to DeFiLIama data, as of May 7, the TVL of the PRISM protocol was close to about 500 million US dollars, but from May 8, the price of LUNA tokens began to plummet, and the decoupling of UST caused users to withdraw from The funds were withdrawn from the agreement, and its TVL continued to fall. At present, the TVL is only 87 US dollars. The situation is bleak, and the project is almost on the verge of life and death.
The PRISM protocol is an official project launched by Terraform Labs. Its latest tweet on May 13 said, “The PRISM protocol never relies on UST, and it can split any asset.” The team will also explore other opportunities in the coming weeks, including redeploying the protocol on any community-supported Terra fork or other public chain. Officials also open discussions on Prism Forum (forum.prismprotocol.app), while community members are welcome to come in and post their thoughts. As of now, the official team has not announced any further development plans, and community members are welcome to come in and express their ideas.
To our community:
The last few days it’s been difficult to watch what’s happened on Terra & our heart goes out to the LUNAtics & Refractooors out there who’ve been affected.
We had only just completed our v1 launch and we were excited about starting to roll out our v2 product.
— PRISM (@prism_protocol) May 13, 2022
Pylon Protocol introduces a future-yield-based IDO platform to DeFi, as well as cash flow payments from the future, built on top of the fixed-rate storage protocol Anchor. At present, the product is launched on the Pylon Gateway Launchpad, and many Terra ecological projects have already carried out IDO on it. Users can get project token rewards by staking UST to different mining pools, and participate in IDOs of different projects in this way.
Pylon Protocol is the fifth project directly incubated by the TerraForm Labs team. Due to its unique IDO mechanism, the protocol itself is strongly dependent on the UST and Anchor protocols. With the severe de-anchoring of UST and the exodus of funds from the Anchor protocol, Pylon Protocol also suffered a serious blow. According to DeFiLIama data, before UST was de-anchored, its TVL was about $240 million. As Terra’s “collapse” effect intensified, the project party had to open all staking pools to allow users to withdraw UST. As of now, Pylon Protocol’s TVL has fallen in a waterfall, leaving only $5.4 million.
The official released a long tweet on May 12, saying that the official team has already started a series of work on the contract migration issue. Currently, all staking pools have been opened to allow users to withdraw UST, but there will be no updates after the work progress and specific details.
Terra Name Service
Terra Name Service is a decentralized domain name service built on the Terra chain, turning long, random and unreadable Terra addresses into short, personal and team-specific addresses (.UST).
Due to the plummeting price of LUNA and the de-anchoring of UST, the price of Terra ecological domain name TNS token has been affected, and its price has plummeted nearly 20 times since May 8 (from $0.2 to $0.014), and the number of TNS domain name registrations is also very few.
The official Twitter posted on May 12, saying that it will announce the next step as soon as possible, but has not updated any progress and remedial measures so far.
The death spiral of UST caused the entire Terra ecosystem to collapse directly. Terra founder Do Kwon launched a proposal for a reconstruction plan on May 14, hoping to protect the community and developer ecology by forking out a new chain. In the token distribution of the new chain, 40% will be distributed to LUNA holders before UST de-anchoring, 40% to UST holders when the new chain is upgraded, 10% to LUNA holders when the old chain stops, 10% as ecological development funds. At present, the proposal is still under discussion, and there are many disputes, including directly questioned by Binance CEO CZ that the fork will not bring any value to the new chain.
At the same time, Terra’s other public chain competitors are also eyeing its ecology. On May 14, Polygon Studios CEO Ryan Wyatt tweeted that he is working with some Terra ecological projects to support their migration from Terra to Polygon, and will provide funds and resources to welcome them to the Polygon platform. On May 15th, Juno Network, the Cosmos ecological smart contract public chain that uses the same technical architecture as Terra, launched a proposal for a Terra Development Fund, planning to provide 1 million JUNOs (worth more than 4 million US dollars) to support the Terra ecological project migration In Juno, some other public chain officials (such as CSC public chain) or the community have also expressed their welcome to the migration of the Terra ecological project.
On May 17, Do Kwon put forward another proposal on Twitter, hoping to fork a new chain. The new chain will no longer have the stablecoin UST. The total amount of tokens in the new chain is 1 billion, which will be distributed to the old chain in different proportions. LUNA\UST holders, communities and developers, etc. If the proposal passes, the new chain will be released on May 27. In any case, there is no doubt that users, funds, and confidence in the Terra ecosystem have been hit hard, and it will be difficult to recover in a short period of time.