In a recent tweet, Binance CEO Changpeng Zhao spoke out against Terra’s plan to fork the blockchain. Zhao stated that he doesn’t think the fork will work because it won’t provide any value.
“This won’t work,” Zhao said in a tweet on Saturday. “Forking does not give the new fork any value. That’s wishful thinking.”
Personal opinion. NFA.
This won't work.
– forking does not give the new fork any value. That's wishful thinking.
– one cannot void all transactions after an old snapshot, both on-chain and off-chain (exchanges).
Where is all the BTC that was supposed to be used as reserves? https://t.co/9pvLOTlCYf
— CZ 🔶 Binance (@cz_binance) May 14, 2022
This is a powerful statement coming from one of the most influential figures in the cryptocurrency industry. It will be interesting to see how this plays out and whether or not Terra (LUNA) will be able to gain any traction with their proposed fork that includes the distribution of 1 billion tokens to stakeholders.
Zhao’s tweet came a day after Terra’s founder and CEO, Do Kwon, proposed a recovery plan following the sudden collapse of LUNA from $120 towards the beginning of April to about $0.0004 on Sunday.
“The Terra community must reconstitute the chain to preserve the community and the developer ecosystem,” Kwon said.
Still, according to Zhao — who says he’s “very disappointed” with how the Terraform Labs team handled the UST/LUNA collapse — “minting coins (printing money) does not create value, it just dilutes the existing coin holders.”
Incentives are “just a bootstrap mechanism,” he added.
The design flaw: minting coins (printing money) does not create value, it just dilutes the existing coin holders.
Incentives doesn’t create value. It is just a bootstrap mechanism.
Build products people use.
— CZ 🔶 Binance (@cz_binance) May 13, 2022
Zhao also questioned what the Luna Foundation Guard (LFG) is doing with its Bitcoin (BTC) reserve after UST lost its peg.
“Shouldn’t those BTC be ALL used to buy back UST first?” he asked.
According to reports, LFG has yet to answer why more than $1.2 billion worth of Bitcoin in its reserves remain unaccounted for. Also, out of the total BTC reserves, LFG recently provided a loan of $750 million in BTC to over-the-counter trading firms and market makers.
The Foundation’s acquisition of 70,736 Bitcoins (worth over $2 billion) as forex reserve for Terra’s UST caused a severe depegging from the greenback’s value and created a huge mess in the crypto market.
As an algorithmic stablecoin, UST was meant to be worth $1 at all times, but it failed and is currently valued at $0.18.
The Foundation has not yet commented on the matter, but it is sure to be under intense scrutiny in the coming days. For now, LFG remains one of the biggest enigmas, or failures, in the crypto world.
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