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Before we begin, let's try to understand the workings of UST. UST is an algorithmic stable coin, rather than having a reserve basket of fiat like the US Dollar and euro functioning as collateral to maintain the peg (similar to USDC, USDT, and in part our banks) they use a secondary token called LUNA as a stabilizer. Luna has a free-floating value and grows as the terra ecosystem is used and speculators buy the token. Whenever the price of UST falls below a dollar (1:1), new LUNA is minted and sold at a discount to buy and burn UST from the open market, increasing the value of UST in the process. Vice versa, when the price of UST is above a dollar, traders are incentivized to burn Luna in exchange for a dollar in UST, increasing the supply and theoretically resulting in the price eventually dropping back to 1$. It is assumed that through these incentivizations, traders will arbitrage on the price differences, and stabilize the market. As we can see things can start to differ when there are bigger market movements because there is not a lot of real collateral.

So what has happened now? For a long time, critics have been saying that one of Terra’s most significant utilities, Anchor Protocol, similar to a savings account, might not have sustainable interest rates [1] [2]. Hence there could have already been some fear building up amongst its users. From then on, as stated by several Twitter sources the story starts around March when the Luna Foundation Guard (LFG) started buying Bitcoin (BTC) to act as collateral in times of need. By March 26th, 2022, they had accumulated over $1bn+ worth of Bitcoin, this is the first leg that made the attack possible.

The second leg comes in the form of an announcement for the 4pool, a soon-to-come stable coin liquidity pool meant to ensure a stronger cross-chain peg for UST and others. The 4pool is to be a successor of the currently existing, similarly functioning 3pool.

It is further speculated that the attacker borrowed 100K BTC from Gemini ensuring enough liquidity to execute the coming attack and create the necessary shorts and long future positions to make it profitable. Summed up, the attack likely has a $4.2bn short position built on BTC and a 1$bn in UST. With this, the attacker sets the stage to create a run on the bank and earn money on his future positions. 

In anticipation of the 4pool, LFG removes $150M from the 3pool liquidity on May 08 at 05:44. Very shortly thereafter, the attack uses $350M of UST to drain the remaining curve liquidity 

This action only sent the UST peg to $0.972. As a response the LFG starts selling BTC to defend the peg, causing downward pressure on BTC while the run on UST was just getting started.

The attack then continues on the Binance exchange, where the remaining amount of the $1bn UST is offloaded. This attack triggers a panic wave amongst UST and Anchor users, causing the peg to spiral as low as $0.70 as people flee for the exit.

In the meanwhile, the LFG is selling more BTC and buying UST whilst the attacker is selling UST which could be an explanation for Bitcoin dropping 25% from $42k to $31.3k. The Terra chain then gets congested and several central exchanges suspend withdrawals of UST; which fuels the bank run panic even more before bottoming out at $0.60 on the 10th of May.

What then ensues is a continued battle between the UST algorithm, LFG, the attacker, and panic amongst many UST users. Luna is minted continuously in the battle and drops from an ATH of $40bn to $800m. It is speculated that the attacker should have been able to profit from an amount of $800m or more.

After a few days of mostly radio silence, Terra and LFG founder Do Kwon tweeted his plans to save the UST peg. In essence, the algorithm will be tweaked in a way such that Luna can be minted 4x as fast to buy up and burn UST 4x as fast. Whether this will save UST remains to be seen, we can only tell that these assets are currently very high-risk. Besides the obvious risk of Luna and UST, you should be mindful of other DeFi protocols that could be using UST or Anchor underwater to generate yield.

In conclusion, a potentially flawed algorithm, a big pile of lent money, willing attackers, and market fear caused the third biggest stable coin (and its backing token) to collapse heavily. However, the story is far from over. It will be interesting to see how Do Kwon's plan to reverse the free-fall of both UST and Luna will pan out. In the meanwhile, news has already reached US Treasure, secretary Janet Yellen, which today pushed for stable coin regulation by the end of this year. We will keep following the story and post updates as we receive new information.

Terra USD (UST), an algorithmic stable coin that is supposed to be pegged 1:1 with the US Dollar seems to be the victim of an attack similar to how the bank of England had fallen victim in 1992 in a move by George Soros. With a price of only $0.42 per token, it is currently in a tough battle facing a significant risk of permanently losing all its value. How did UST lose over $50 billion, and what does it mean for the crypto ecosystem? Let's dig in to find out!

Third biggest Stablecoin UST spirals and loses $50 billion in a few days.

After private investors started noticing cryptocurrencies after the initial boom of Bitcoin in 2013, many new cryptos appeared as altcoins (alternative coins), attracting more private investors. A few years later, institutional traders joined the market too, and now even governments are buying these digital assets.

Adoption by governments began with El Salvador accepting Bitcoin as a legal tender last year, which compelled many other countries to seriously consider making similar moves, including Paraguay, Brazil, Mexico, Panama, and more. But why is everyone trying to pick the fruits of this new technology? And what can you do with it?

By the way, we have written an entire article on the adoption of blockchain technology.

At its core, blockchain technology is about shared, immutable ledgers that help record transactions and track tangible and intangible assets like houses, cars, cash, land, copyright, intellectual property, and patents.

In simple terms, you can use a blockchain to securely store and share data without a single party being able to tamper with it. Instead, multiple parties have to agree (come to a consensus) on a piece of data before it becomes valid, which is where the term decentralized originated. How the consensus protocol is implemented depends on the type of blockchain.

We call this technology Distributed Ledger Technology or DLT in short. DLT enables the recording of many transactions on a distributed ledger without the power to alter the records. This tampering prohibition, also known as immutability, means one can not edit a transaction even if there was a mistake. Transactions can only be reverted when adding another transaction. These properties are beneficial for digital cash, which is why it is not a surprise that Bitcoin was the first to implement it.

Another popular feature of blockchain technology that arose a few years ago is smart contracts. They are simple programs that run on the blockchain and are executed when predetermined conditions have been met. These self-executing automated contracts help speed up the process and remove the cost and time associated with a supervising intermediary.


Powered by these smart contracts, the most popular use case of blockchain technology is decentralized finance (Defi), which is an umbrella term for financial applications leveraging cryptocurrencies. Defi includes applications for lending and borrowing, community investments, crypto savings, stable coins, and much more. These projects usually live on the Ethereum, Polygon, or Binance blockchain, but many more chains exist.

To give an idea of the size of Defi: at the end of the previous year, the total value locked in public Defi projects was USD 250 billion, compared to only USD 1 billion one and a half years prior in May 2020. The total crypto market numbers are even more impressive, reaching nearly 16,000 unique cryptocurrencies and a total market capitalization of around USD 2 trillion, about two-thirds of Apple. The number of exchanges that facilitate trade in these coins has already surpassed 440.

In a future article, we will go more in-depth about other interesting use-cases, like Non-Fungible Tokens (NFTs) and more.

Like Bitcoin’s network, the public blockchains mentioned before are open for anyone to join and participate in the consensus protocol, provided they meet the essential qualification standards such as having considerable computational power. All data on these blockchains are public, making them a good fit for upcoming Decentralized Autonomous Organizations or DAOs in short (read our article on what they are). However, being public also makes them a big red target for hackers and enthusiasts looking for privacy and security vulnerabilities.

Private blockchains, on the other hand, while staying decentralized and peer-to-peer, remain under the controlling governance of one organization. It is upon the organization to decide who will participate in the network, execute the consensus protocol and maintain the shared ledger. These private blockchains are often used to secure information within a single large organization.

Lastly, The consortium blockchain expands the idea of controlled governance from one business to many. In this network setup, instead of a single or many parties, multiple pre-selected organizations have the authority to provide access to the blockchain. A consortium blockchain network proves beneficial when a small number of organizations have to agree on a piece of data. For example, when multiple companies work together with checking the health and safety information of food.

Why does all this matter? Blockchain technology is more than trading Shiba tokens on an exchange. For example, blockchain technology is already being used in businesses to trace every part of a supply chain, make asset transactions faster, prevent disruptions without spending on intermediate checkpoints, improve and ensure the authenticity of received information, and much more.

Although it sometimes feels like the massive growth in crypto prices attracted some fundamentally weak projects and scams, most projects bring a level of innovation not seen in other areas. At Byont, we help businesses and startups globally successfully enter and navigate this blockchain ecosystem.

Whether you have a killer idea or just exploring the possibilities of blockchain technology, we provide end-to-end assistance from concept to smart-contract development. We have successfully assisted startups and businesses with token launches, NFT publications, and smart-contract development across multiple chains.

Nowadays, it appears as if everyone is buying cryptocurrencies and Non-Fungible Tokens (NFTs). Big tech and even governments have joined too, but a blockchain is more than trading tokens on an exchange.

A primer on blockchain and its value beyond cryptocurrencies

One research estimate suggests that the blockchain market will grow at an astounding pace of 68.4%  Compound Annual Growth Rate (CAGR) between 2021 and 2026. The Defi protocols, one of Blockchain technology’s most prominent real-life use cases, now hover around a combined size of $250 billion from the size of a mere 1 billion, registered during the middle of 2020. Cryptocurrencies, another area where a blockchain is imperative, are more than 16,000 at present, traded on nearly 450 exchanges. 

Although a bearish market outlook might cast a grey outlook and doubts on the minds of retail investors, investments by organizations in the advancement of blockchain technology and products have never before been so high. 

These numbers stand testimony to the spread of blockchain technology, not just for cryptocurrencies but also for a large variety of industries discussed in our previous article.

Blockchain in Globally Leading Businesses

According to Blockdata, 36 of the top 100 public companies have invested in 101 blockchain companies through 140 investments, 29 industries, and 83 different use cases.

And these companies aren’t just investing, no they are building too. Mostly focused on back-end tech and not consumer-facing products, this could explain the heavy investments of which most of the public isn’t yet aware of.

If we look at businesses with the maximum number of blockchain patents, the list is ruled by some of the globally leading brands. Alibaba Group Holding Ltd has a maximum of 2,588 active worldwide blockchain patents and pending applications. Some other companies on the list include Tencent Holdings Ltd. (1,703), IBM (962), Mastercard Incorporated (361), Siemens Ag (248), Accenture Plc (208) Visa Inc. (192), etc. Countrywise, China leads the game by a big margin when it comes to the total number of blockchain patents. China has more than 34,000 blockchain patents to its credit, followed by the US (8,759), Korea (4,035), and Europe (2,288). 

These numbers stand testimony to the spread of blockchain technology, not just for cryptocurrencies but for a large variety of industries which we discussed in our previous article.

Industry Leaders and Celebrities Invested in Blockchain

Elon Musk has probably been the most well-known Bitcoin investor so far. Musk and his company Tesla have delved as deep into Blockchain by investing nearly $1.5 billion. But, not only Musk, the list of people invested in blockchain and crypto assets has been long. It includes the likes of Snoop Dogg, 50 Cent, Paris Hilton, Gwyneth Paltrow, Bill Gates, Serena Williams, Floyd Mayweather, Kanye West, Mike Tyson, and many more.

El Salvador is probably the most significant example of introducing Bitcoins as legal tender for the country, and President Nayib Bukule promotes it with all his might. But in other countries, the government has been proactive. Miami Mayor Francis Suarez, who agreed to accept paychecks in 100% Bitcoin, is actively incentivizing the spread of cryptocurrency across the city. To match up with Miami’s effort to become a Blockchain hub, the New York City mayor-elect Eric Adams declared plans to take his first three paychecks in bitcoin.

Although the market volatility might have some doubting the future of blockchain products, we see industries gearing up and investing in development like never before. Investments like these don’t immediately pay off; advancing technology and building new products takes time. We have seen many great products come to the market in 2020 and 2021, originating from investments made in 2018, thus taking two years. We expect similar things and likely even more for the coming years.

Do you want to be at the forefront of innovation and learn what blockchain can mean for your business? At Byont, we have helped businesses and startups globally successfully enter and navigate this blockchain ecosystem.

Whether you have a killer idea or are exploring the possibilities of blockchain technology, we provide end-to-end assistance from concept to development. We have successfully assisted startups and businesses in developing new business models deploying smart contracts across multiple chains, token launches, and NFT publications.

Blockchain is here, and its presence is beyond denial. The question that the industry experts, businesses, analysts, and even governments are looking at with great curiosity now is how fast it will keep growing.

The adoption of blockchain technology by leading figures, businesses, and governments

In the ideal scenario, the phenomenon of decentralization in blockchain refers to giving back supervising and decision-making powers from centralized authorities, be it an individual, corporation, or group of people, to a dispersed network of users or direct beneficiaries of the system. These could be local neighborhoods, but also communities involving similar interests.

Centralized exchanges (CEX) were the first to establish themselves in the cryptocurrency market, but recently a new type of exchange has made headways for itself, the decentralized exchange (DEX). At present, with more than 16,000 crypto assets traded across nearly 450 exchanges, we see decentralized exchanges slowly taking market share every month.

But, what are the differences between a CEX and a DEX, and how do you use them?

When you buy assets from a centralized exchange, the exchange matches you as a buyer with sellers through an order book - the same way it happens in online brokerage accounts for regular stocks. These centralized exchanges will hold your funds, both fiat and crypto, and let you exchange them for hundreds of virtual coins. Usually, they also supply services for buying cryptocurrencies with fiat money with a slight markup. All transactions are stored in their databases and thus are private. Some popular ones are Binance, Crypto.com, and Coinbase.

In a DEX, on the other hand, there are smart contracts that run as an autonomous financial protocol directly on the blockchain. Due to the lower volume and technical challenges, most DEXes use an Automated Market Maker (AMM) instead of an order book to match buyers and sellers. Because these smart-contract-powered applications live directly on the blockchain, you need a wallet to interact with them, but with the advantage that all transactions stay public, and thus tampering is less likely. Some popular ones are Uniswap, 1Inch, Curve Finance, and Pancakeswap.

Is tampering with data by exchanges a valid concern then? Well, yes. Since centralized exchanges deal with a large volume and significantly high number of assets, they have considerable influence over the crypto market. Their relative opaqueness regarding transactional data caused some instances where CEXes have manipulated the market with insider trading, fake volume, and price manipulation.

Also, the lack of inherited security from blockchain technology have made them a massive target for bad actors. Centralized exchanges, like the Coincheck, Mt. Gox, BitGrail, NiceHash, and Bitfinex, have been at the center of some of the largest crypto hacks in history.

Does this mean you should not use them? Well, maybe not the ones listed above, but popular centralized exchanges are the recommended exchange for most users. Currently, 88% of all cryptos worldwide are traded on centralized exchanges, and for a good reason. We will explain the practical application of a CEX versus a DEX in a minute.

DEXes solve some of these issues with transparency, publicly audited code, and the cryptographic security offered by the blockchain because of their very nature. And because they don't hold the users' funds, which are stored in their private wallets, there is a lower incentive for hackers to target these exchanges.

On the other hand, given their influence most CEXes won't allow just any token to be listed on their exchange. Usually these must be well established and go through and extensive screening process. This is not the case with DEXes, where everyone can list their token, some of which are vulnerable to rug pulls, or might not have enough liquidity to be sold at any time.

The open nature of DEXes make them a popular starting point for Initial Coin Offerings (ICOs).

Most people buy their crypto currencies on centralized exchanges. Nowadays, all of the popular ones are well regulated and secure. Furthermore, most tokens on them are well established making them a relatively safe endaver.

If you're looking for a bigger risk appetite and have some technical knowledge, you might look to install a private wallet, like Metamask, which you can use to interact with these DEXes, buy an NFT or join an ICO on different blockchains. All of which we will discuss in a future article.

Decentralized exchanges match the narritive of blockchain better but are relatively hard to use, and usually unregulated. Which is why, as long as you stay with popular options, most people are better off with centralized exchanges. However, most new projects start on DEXes and if you like being early, it might be worth looking into.

If you are developing a decentralized exchange of your own, want to list your cryptocurrency, or are building a unique Defi product, you might face high complexity technical challenges. At Byont, we help businesses and startups globally successfully enter and navigate this blockchain ecosystem.

No matter at what stage you are, we provide end-to-end assistance from concept to development. We have successfully assisted startups and businesses in developing new business models, deploying smart contracts across multiple chains, token launches, and NFT publications.

Getting into crypto usually means spinning up a crypto app on your phone and buying your favorite currencies using your favorite payment method, but with convenience also comes risk.

Centralization in a decentralized ecosystem: DEX vs CEX

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We help startups and businesses turn ideas into amazing products using blockchain technology.

Creating amazing blockchain products? It's harder than you think.

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Blockchain technology is overwhelming. Where do you even start?

Am I supposed to be doing something with blockchain?

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Third biggest Stablecoin UST spirals and loses $50 billion in a few days.

A primer on blockchain and its value beyond cryptocurrencies

The adoption of blockchain technology by leading figures, businesses, and governments

Centralization in a decentralized ecosystem: DEX vs CEX

Lets build the future, together.

Unlocking the full potential of blockchain by utilizing smart contracts|

We help startups and businesses turn ideas into amazing products using blockchain technology.

Creating amazing blockchain products? It's harder than you think.

I have an idea! How do I get started?

Blockchain technology is overwhelming. Where do you even start?

Am I supposed to be doing something with blockchain?

We help you create amazing products.

Blockchain development

Consultancy

Web- and mobile apps

Security

Hear what our clients have to say.

Learn more and get inspired.

Third biggest Stablecoin UST spirals and loses $50 billion in a few days.

A primer on blockchain and its value beyond cryptocurrencies

The adoption of blockchain technology by leading figures, businesses, and governments

Centralization in a decentralized ecosystem: DEX vs CEX

Lets build the future, together.

Unlocking the full potential of blockchain by
utilizing smart contracts|