After stepping out of his usual neutrality in recent days, Binance CEO Changpeng Zhao said via Twitter that the Terra fork was pointless and would not create any new value. According to him, the best way to get UST back on track would be to combine Terra’s Bitcoin (BTC) reserves with the LUNA token burn.
Changpeng Zhao critical of Terra
The CEO of Binance had already been understandably critical of the management of the Terra ecosystem’s collapse, and more specifically of its LUNA and UST tokens. Indeed, on May 13, Changpeng Zhao had publicly stated that his teams had proposed solutions to Terra, which remained unanswered.
Later the same day, Do Kwon, the founder of Terra, published a proposal to save the blockchain structure and try to maintain its community via the distribution of a new token.
Following this announcement, CZ took the opportunity to give a new update on the situation and clarify his ideas. According to him, the idea of fork to a “Terra 2” advanced by Do Kwon is doomed to failure as it will not create any new value:
“It won’t work. Doing a fork does not give any value to the new fork. It’s wishful thinking. You can’t undo all the transactions after an old snapshot, both on and off the chain (exchanges). Where is all the BTC that was supposed to be used as a reserve?”
Also, in order to protect Binance users, Changpeng Zhao had recently announced that the UST/BUSD and LUNA/BUSD pairs would be disabled on Binance, explaining at the same time implicitly that the price of the latter 2 was clearly not on its way back up.
A lack of transparency coming from Terra
For the past few days, CZ has been defending the idea that the best way to get back to the $1 peg (benchmark) for UST would be to burn the amount of LUNA tokens needed. Indeed, since the UST depeg, a huge amount of LUNA tokens have been created, totally diluting their value.
“The reduction in supply should be done by burning, not forking at an early date, and abandoning all those who tried to save the token. I don’t own LUNA or UST either. I’m just commenting.”
The burn added to the use of Terra’s Bitcoin reserves could, he said, get UST back on track.
“Create [minter], forker, that does not create value. Redeeming, burn, it does, but it requires funds. Funds that the project team may not have. […] In this respect, I would like to see more transparency from them. Much more! And especially regarding the transactions on the blockchain (txids) of all funds.”
He concludes by adding that error is human, catchable, but that it is essential to always be transparent with your community:
“Failures can and will happen. But when they do, it’s extremely important to be transparent, communicate promptly, and take responsibility to the community.”
A noticeable absence from Do Kwon
Although the name of Terra’s founder is not mentioned, it is highly likely that CZ is referring to the lack of communication from Do Kwon, who was completely off the radar for almost 3 full days during the loss of value of his 2 tokens, and this after he told his community to “hold on”.
As simple observers, we don’t know at the moment what is going on in Terra’s offices, but it seems regrettable that the teams in charge of the project refuse the help of the CEO of Binance, who has already helped financially projects in difficulty in the past, notably following the hack of the Ronin sidechain for example.
Changpeng Zhao also recalls through his tweet that Binance Labs had participated financially to the tune of 3 million dollars in 2018 to support the development of the blockchain Terra. He clarifies, in conclusion, that “UST came much later after our initial investment”.
