We assume — or is ‘hope’ the right word? — that you, our dear Higher Order Reader, don’t give a shit about the stablecoin drama that for a week now has riveted the crypto world. All this talk of algorithms and market cap and dollar pegging has me feeling like I’ve stumbled out of web3 and ass backwards into the weirdest Big Short slashfic on the Internet. A fundamental part of the human experience is the feeling of being known, and so, yes, a large part of me hopes y’all prefer the pop psychology / NFT pans to the heavy, technical reads. Perhaps you even failed Macro Econ, just like me. Nevertheless, by nature of branding ourselves as any sort of authority on web3, we feel contractually obligated to bring you an update on the only important thing on crypto Twitter today.
Since the top of the week, Terra (UST), once the third highest stablecoin by volume, remains untethered to the fiat dollar, down almost 50% in the past day and well over in the past week. Its sister coin, LUNA, dropped by almost 100%, leading to a delisting on Binance initially, then, at time of writing, to the freezing of all on-chain operations. These outages are rarely seen on blockchain, considering it’s supposed to be immutable / immortal / all the shit we should’ve learned better than to throw around willy nilly in the millennia and a half since the fall of the Roman empire.
Such outages only occur, to be fair, in rare cases like this. Validators — those anonymous, decentralized parties responsible for verifying transactions on the blockchain — decided en masse to not verify transactions within the Terra ecosystem. This process is the whole reason blockchains are considered immutable: it’s hard to hack a system when it’s managed by and hosted across countless disconnected parties and servers. However, when the vast majority of an ecosystem’s adopters are dumping their assets to jump ship (and the price of said asset is, in turn, plummeting) it becomes a lot easier for a single party to acquire 51%. At which point, I guess, if it hasn’t already, everything goes to shit.
Side note: this remote worker strike screams communist to me, which I would’ve assumed to be firmly outside the wheelhouse for these fervent anarcho capitalists. Then again, Ayn Rand was all into withholding work to topple corrupt systems, too, so long as you consider yourself a ‘man of the mind’ and superior to us proletariat plebians. Which, I’ve never met a Terra blockchain validator myself, but if I were a betting man…
Anyway, according to the crypto journalism community at large, there’s been no consensus in terms of a discernible cause for the crash. But it wouldn’t be Culture H0R if we didn’t manage to make you co-conspirators on a theory as asinine as it is plausible. El Prof forwarded me an obscure tweet quoting a now-deleted post from @IOHK_Charles (Charles Hoskinson, a blockchain CEO) who in turn shared a Discord message forwarded to him by one ‘Anna’ from an unknown primary source. It offered an explanation of sorts, preserved below for your viewing pleasure.
If, against all odds, you trust the farcically online grapevine through which we heard this theory, feel free to stick around while we break it down for you. Word on the web3 ‘street’ is, BlackRock, the world’s largest asset manager and top shareholder in basically every company you’ve ever heard of, allegedly hatched the market manipulation scheme pictured above to tank the crypto market for profit.
Basically, they borrowed a shitload of Bitcoin from the crypto exchange Gemini, tricked the Terra team into buying it at its current valuation by offering a discount if they paid in UST, then offloaded their massive shares in both, triggering a bank run on Anchor, a lending and borrowing crypto protocol (read: Ponzi scheme) with major holdings in LUNA and UST. This triggered both the crash of those tokens, as well as the value of Bitcoin and the DeFi market at large, allowing BlackRock to buy back said shitload of Bitcoin for cheap and repay their loan at a profit. And all it took was fucking over thousands and singlehandedly destroying a market. You know, fairly standard late stage capitalism stuff.
Now, to hear El Prof tell it, this was all a mere smokescreen for a far bigger ruse: a ploy to force the government’s hand in overregulating the only new industry to pose a threat to the other dozen or so BlackRock singlehandedly controls. But, much like the dip, whether you buy it is up to you. Charles did eventually delete the tweet. Which, yes, could mean he thought better of broadcasting unverifiable information to an impressionable audience of near a million. (Although idk, it is 2022…)
Or, it could mean a representative from one of the supposed 30% of major companies controlled by a single shadow corporation made him an offer he couldn’t refuse. The incredible thing about existence being but a dream (or a simulation) is you get to make the meaning and choose the interpretation. All we Culture H0Rs can do as your trusted unreliable narrator is present the facts.
Like how, one day after the initial tweet, Charles received this in the mail, with no return address:
Looks like you just got served a Black Hand by the Hermetic Order my dude, but, probably nothing, yeah.