A centralized cryptocurrency exchange failed because they gambled away their reserves and suffered a bank run. Nothing to do with the underlying blockchain technology, just good old unregulated banks screwing over everyone.
> Terraform Labs was one such entity. But its protocol – which aimed to ensure TerraUSD's price would remain stable – failed miserably in part thanks to its underlying blockchain being unable to scale as scared investors sent demand for transactions soaring.
Was this an actual technical problem or was this a bank run?
Remember: this is not a cryptocurrency problem, it's a banking problem. This guy created a literal bank. People deposited funds in it. Instead of simply being a custodian, he took the money and "invested" it. And lost it all.
I wish this sort of thing would happen every time bankers screwed things up. Instead the government bails them out.
The millions they got from token sales were demoninated in cryptocurrency. All of them trying to cash out at once and you see what happened. A run on the bank.
They were a DeFi ponzi chain which was obviously going to fail to anyone who spent time looking into it. They were printing a stablecoin backed by nothing.
Far different from the blue chip DeFi apps on Ethereum that the OP listed, which process billions of dollars per day without issue.
DeFi makes things more transparent, but it doesn't make them risk free.
I personally profited off the collapse because of the transparency. Couldn't do the same with Celsius or traditional finance.
It was traditional, centralized finance that kept this from spreading. But because it's crypto, they had effectively no auditing or reporting requirements. And part of the central grift was their FTT token.
Crypto was a major factor in this scam and others. True decentralized crypto will never be integrated into society. Crypto fundamentalists can't get past these things.
Is that actually true? I don't follow cryptocurrency that closely but I seem to remember headlines of a site shutting down and something like a million BTC disappearing forever and people never got it back.
It's almost like unregulated financial institutions have a tendency to screw over their customers... No one could have predicted this in the consistently solvent, regulated, and trustworthy cryptocurrency market. It's too bad bitfinex got ripped off by a surely unrelated entity. /s
I think you’re confused about the facts of the situation here. There was no financial service being operated. There was no ongoing business. There was open source code that was thrown over the wall and was locked on the blockchain and immutable.
Regarding CB ACH, They had/have a huge exploitable hole in their ACH system that a friend discovered by accident. Long story short, they credited them for a large sum that they never took from his/her account. I won't put the exact detail of how to trigger the error but suffice it to say it was shocking to learn how a system that deals with large sums of real money could fail in such a way (and likely in a repeatable manner although my friend didn't try as repeating it would likely be seen as stealing).
It's really quite shocking how a ecosystem that touts decentralization has a glaringly centralized failure point - the fiat exit exchanges. When one or two of them goes, it will bring down the whole house of cards. And given how shitty CB's software was (or maybe still is) I just hope I can get my gains out before the whole thing comes crumbling down.
The definitions you use match the recent failing crypto exchanges behavior. They completely obfuscated what they were doing. They had made loans if hard crypto assets to other companies, other exchanges, and either refused to describe the situation or outright lied about it.
Ok so I know this answer! They lost money through exchange hacks and bad banking relationships so they could never rely on 1:1 backing and fees, they had to make it up through bitcoin price increase which they contributed in pumping and then backing with commercial paper from their sister exchange.
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