Dialogue with Terra Founder: Tried to save everything during the collapse, but ultimately lost it all

Source: Zack Guzman, Coinage

Compilation: Deep Tide TechFlow

UST, the stablecoin that lost its peg to the dollar, was once championed by one person: Do Kwon.

Three months later, as the narrative around UST gradually crumbles, Do Kwon has re-emerged in the public eye. Now, Do Kwon is attempting to rebuild UST, but almost from scratch. For most people, with doubts about his past, it’s natural to disregard his future. Therefore, Coinage member Zack flew to Singapore to conduct a two-day interview with Do Kwon at his office and home to see if the collapse of Terra was truly just a failure or a scam.

Do Kwon speaks candidly for the first time on camera, once believing he was very successful, and attempted to raise $2 billion on the night of UST's collapse, only for the news to leak and shorts to quickly squeeze, "I wanted to bet big, but I lost"…

This article is compiled based on the video content:

Zack: How do you refute the view that "UST is a scam"?

Do Kwon: I don't think the UST incident involves a moral issue, especially in an industry that requires a lot of technical background to understand. But it's very difficult to provide a satisfactory answer when everyone is extremely hurt and angry.

Zack: The collapse of UST happened in just 72 hours. Were you surprised by the speed of this collapse?

Do Kwon: I never thought this would happen. Since then, I have been working hard to rebuild the ecosystem and the community, just like I have been doing for the past five years. I haven't found the right words to describe this feeling; many people in the community have lost their money, lives, savings… Many projects built on Terra may have had similar experiences, and the situation may be even worse.

Zack: As the creator of all this, it must be cruel.

Do Kwon: Obviously, in hindsight, many of the beliefs I held and the assumptions I made were wrong.

Zack: I think trust is at the core. Ironically, in many of these trustless systems similar to UST, a question arises: do you trust the people who created these trustless systems? What do you think you need to say to make everyone believe you?

Do Kwon: If doing all this was for personal gain, then that would be the dumbest way to go about it. Why would you spend five years betting your entire reputation, naming your daughter Luna, and then become the most hated person on the internet in a short time?

I think the only thing I can do and do best is to be frank about everything that has happened and admit my mistakes.

Zack: When the Anchor protocol emerged, its APR was not 8%, but 20%. It is said that at its inception, some employees felt that a 20% APY was somewhat outrageous, far above the existing levels.

Do Kwon: In fact, the internal consensus on interest rates was in the thousands of percent APR.

Zack: In the rapid development process, did Anchor ultimately capture nearly $17 billion during this journey, which met your expectations?

Do Kwon: I feel that every day, UST is stronger than the day before.

Zack: There was another operational strategy behind UST, which seems to differ from the initial promises of UST and LUNA. It is an algorithmic stablecoin that operates perfectly without the need for reserves.

If starting with Bitcoin and adding various types of collateral, UST truly had the opportunity to become the decentralized stablecoin for all cryptocurrencies. But I'm curious where this plan came from and what your motivation was at that time?

Do Kwon: We started doing this with Bitcoin because we believed it was the most resilient and unbiased digital currency on the planet. If we made some optimizations related to economic stability, we might have enough reserves.

I think on another level, I bet too much on Bitcoin. Honestly, I didn't expect it to drop this much. I know that over time, Bitcoin has now dropped 80%, but at that time, I was thinking about the economic output created within the crypto industry and the number of people who had entered the industry to start building, which was unparalleled. At that time, I wanted to try to build a truly decentralized and resilient product, but I was wrong.

Zack: Let's look at the actual timeline of events. When UST slightly decoupled, Do Kwon's Twitter account seemed very calm. But when things took a turn for the worse, Do Kwon began to personally communicate with the Terra team. What happened that day?

Do Kwon: At that time, I was in Singapore. I woke up in the morning and thought the Curve pool was unbalanced because someone made a very large trade. So I thought the initial trading volume was about $84 million, and then I accumulated several hundred million dollars to counteract it.

But as seen on Twitter, market sentiment began to worsen, and more people started trading on Curve. The selling pressure we saw began to intensify, so we started raising $2 billion in the middle of the night to resist this shock, but the news leaked, and we began to see a large accumulation of LUNA shorts, so the tokens we originally planned to sell were already on a downward trajectory.

Zack: When the trades didn't go through, what was the situation in the war room?

Do Kwon: When I look back at the scene at that time, I didn't feel that UST couldn't re-peg because you also need to know that I had gone through several crises like this before, and it always re-pegged.

Zack: At what moment did the discussions in the war room shift to "we've tried everything, but it hasn't worked"?

Do Kwon: When I entered a state of slight shock, I think I didn't even notice at that time because, like most people in those places over the past few days, we hadn't slept at all.

Zack: How much did you sleep that week?

Do Kwon: Several consecutive days were all-nighters, I don't really remember. I just didn't pay attention to the passage of time. So even now, if you ask me what happened during the day and what happened at night, I couldn't tell you because I barely slept, you know, everything was dark.

Zack: Many in the Terra community have talked about suicide and losing their life savings. A friend of my co-founder also committed suicide. There are many such stories. What do you want to say to those affected?

Do Kwon: After the chain reaction stopped, I spent several days calling many people I had personally talked to in the Terra community. Everything was very difficult.

Zack: Have you thought about retracting some of the things you said in the past? Especially some things that were widely spread as flags.

Do Kwon: I think sometimes I would do things to cater to the community. In hindsight, if you ask me if I wanted to fully admit to some of the language conveyed, I really didn't want to.

Zack: What was the experience like with the Terra community? Did it change you as a person?

Do Kwon: I think the biggest insight is that I have a lot of clarity about the things I like to do. So I cherish that moment when I know what the future should look like. And then because of the work you do, it will have an impact on the present.

Zack: I mean, what personal loss did all this bring you? Or because I think you were a billionaire on paper, at least at that time. But associated with this project, it has gone to zero.

Do Kwon: So, as people tell each other, when you look back, things become worse and scarier, even irretrievable.

I just want to make it clear that Terra/Luna is everything to me. I placed my actions on my beliefs, I took a huge bet, but overnight I lost everything.

Zack: Next, it's about legal issues. Although neither of us are lawyers, how do you plan to face all this next?

Do Kwon: You mean, in terms of how to handle due process, right? It's not about what you're prepared to face, but how you face them.

Zack: Yes, it's interesting because after the collapse, your legal team left. We're doing this interview now because you want to talk about what happened transparently and authentically. I don't know if you're communicating with other lawyers now, but you might want to do that.

Do Kwon: Although lawyers wouldn't be happy to work with me, that's the reality.

Zack: But for those now associated with this power, like Daniel Shin, whom we are talking about. Last night, there were reports that prosecutors investigated his house and tried to find some clues. What do you think this means for him?

Do Kwon: Whenever you ask me about feeling bad, I feel like a dancer about to go on stage, always feeling terrible. Considering he has been away from the company for a while, I don't think what happened here has anything to do with him.

Zack: He is still in South Korea. Former and current employees of Terra cannot leave South Korea. Have any of you considered going back?

Do Kwon: It's hard to make a decision now because we have never been contacted by investigators, and they have never charged us with any crime.

Zack: But I, like you, enjoy reflecting on things. What do you think about this? For example, how do you define fraud?

Do Kwon: If you know something untrue and then argue that it is true for personal gain or any possible purpose, then that is fraud.

Zack: However, previously when talking about UST and the Chai-based stablecoin, not many people used it. But once the ecosystem was fully built, you were still talking about Chai as a reason for your bullish outlook on the Terra ecosystem.

Do Kwon: I didn't know about the suspension on March 18 until recently, just like the Wall Street Journal asked us. They tried to suspend Terra's activities and all relationships with friends, and I am no longer involved in the management of Chai.

Zack: But that's your best friend's company.

Do Kwon: I think if I said something good about something, about good news regarding something, then theoretically, I also have the responsibility to say the bad news, especially if the good things I said drew attention.

Zack: But ignoring risks like this, do you see that as fraud?

Do Kwon: When we considered trying to establish UST, like everyone who chose to work here and all the key builders in the Terra ecosystem, in my view, their main goal was to try to build the best decentralized currency. I believe everything they said was aimed at achieving that goal.

Zack: Most people are overhyping the features of the product.

Do Kwon: I don't think that's the case; we tend to emphasize the advantages of products built on stablecoins. I believe everything that excites us about the Terra stablecoin is true.

Zack: But this is a very important question. If it is called a stablecoin, its focus is on stability. Some might look at UST and say this product did nothing. Is that conclusion unfair?**

Do Kwon: I think the correct analogy is that a blood test strip is effective for a while, and then after a while, it becomes completely ineffective.

But this time is different, right? Just like they think the blood test strip never works. In fact, UST worked very well throughout its history. The fact that we were working perfectly before I stopped is visible and open-source and transparent.

Zack: I think you are a smart person, and your understanding of stablecoins may be greater than anyone else in the world. You also know the risks of decoupling. In fact, every algorithmic stablecoin in history has failed. I feel like either Do Kwon was overconfident. In hindsight, no one wants to admit they were overconfident because it makes you look foolish. Or someone lied about this. Which do you think it is?**

Do Kwon: Looking back, it seems very unreasonable, but you have to put yourself in the shoes of the founders. If you have achieved a series of victories, then this ecosystem is slowly approaching $100 billion. You reach that scale, and you hardly think you will fail.

Zack: At that time, you were basically a crypto god.

Do Kwon: I wouldn't say I'm a god; I would say we gained the trust and confidence of many people inside and outside the industry. That made us feel very successful. The fact is, we tried to build the best currency in the world, but it just didn't work out in the end.

You can't let market emotions dictate your actions, right? You can't blame people for shorting, and you can't call people idiots for going long.

Zack: Are you trying to prove that there is a conspiracy, that someone is attacking the community?

Do Kwon: If you ask me if it’s possible that someone is trying to take advantage of this particular opportunity, I would say yes. But if these opportunities exist, then the responsibility lies first with those who created these vulnerabilities. Who is that? It's me; I alone am responsible for any vulnerabilities that may arise, allowing short-sellers to start profiting.

Zack: And what about yourself?

Do Kwon: Are you asking if I shorted? I have never shorted cryptocurrency in my life, let alone shorted Luna and UST.

Zack: When you think of your daughter, you also talked about why you named her Luna, your beloved child named after your greatest invention. What does that mean for her? What does it mean for you as a father?

Do Kwon: Let's put it this way: I am motivated to ensure that her name is not something she should feel ashamed of, but something she can be proud of. Names don't change easily; I think it's an important part of our family history. But I plan to spend a long time building projects here. If my argument is correct, then I believe what I do in the next 20 years will be more meaningful than what happened in the past six weeks.