- Cecilia Barria
- BBC News World
Do Kwon is an elusive figure and has not given any interviews since the collapse of his cryptocurrency Terra.
That’s $40,000 million that disappeared overnight.
This is the amount lost by those who invested in two cryptocurrencies whose value crashed on May 13: luna and terra (aka UST), both created by tech entrepreneur sud 30-year-old Korean Do Kwon.
His story is like that of many child prodigies who arrive in Silicon Valley with the idea of creating the next big innovation that will revolutionize the market.
Kwon studied computer science at the prestigious Stanford University in the United States and worked as a software engineer at Microsoft and Apple until he founded Anyfi, a technology company dedicated to developing connectivity alternatives.
But the creation that made it known around the world came in 2018 with Terraform Labs, a software developer headquartered in Singapore.
Do Kwon co-founded it with Daniel Shin, with the aim of building payment systems based on blockchain technology.
At the time, the entrepreneur claimed that he was creating a “modern financial system” that users could use without having to rely on banks or any other type of intermediary.
This is how he entered the world of cryptocurrencies and gained support from big companies like Binance, who believed in the potential of their cryptocurrencies.
Forbes regarded him as one of the great successful young professionals in the tech world and soon it seemed as if the entrepreneur had the world at his feet.
Without any humility, Do Kwon called his moon cryptocurrency “my greatest invention” and proclaimed to the four winds the qualities of digital currencies to “change the world”.
He even posted on his Twitter account (@stablekwon) that he called his daughter Luna “The name of my most beautiful creation inspired by my greatest invention.”
photo credit, Twitter
“The name of my most beautiful creation inspired by my greatest invention,” tweeted Do Kwon
Madmen and the Cult of Personality
He soon gained the trust of a select group of investors who were proudly referred to as “crazy people” (from the name of the coin).
Kwon’s company has raised hundreds of millions of dollars from major venture capital firms to fund its projects.
In a short time, he gains the confidence of the markets and convinces many “heavyweights” of his risky trading bet based on algorithms created in his own lab.
Unlike bitcoin, whose creator(s) are unknown, “Kwon coins” – as they are called in the cryptocurrency environment – are directly linked to a person.
Among the followers is Mike Novogratz, CEO of Galaxy Digital, who announced his support by getting a Luna tattoo “I’m officially a lunatic”.
The confidence of some major investors in the entrepreneur has reached such a level that the host of the podcast “Mission: DeFi” stated that there was a “cult of personality”.
Why Luna and Terra Are “Twin” Currencies
Do Kwon launched the luna cryptocurrency on the market in 2018 and two years later created terra (UST), a digital currency that belongs to the category of “stablecoin” or stable currencies.
Unlike other cryptocurrencies, those that are “stable” get this name because they are linked to a less volatile asset, such as the dollar.
It is a very different type of currency than digital currencies like bitcoin or ether, just to name a few.
photo credit, Getty Images
On Twitter, Kwon asked for “patience” from the community that had invested in terra
The luna-terra duo have created their own mathematical formula at Terra Labs in which the value of one depends on the other and that is why they are known as “twin currencies”.
Terra, on the other hand, is an “algorithmic stablecoin” that, through complex calculations, always had to maintain a value of 1 USD. No more no less.
Everything seemed to be working fine, until critics began to pounce, warning that Kwon’s creation — seen by some as the work of a genius and by others a Ponzi scheme — could fall apart at any moment.
The collapse
The market lost confidence in Kwon’s algorithmic formula amid falling cryptocurrency prices and bad economic news.
Luna lost all its value (it fell from $118 to $0.09) and terra crashed just as fast.
The sharp drop in both currencies sparked panic among some investors who embarked on a cryptocurrency selloff, leading to an overall decline in the sector.
“I am heartbroken by the pain my invention has caused everyone,” Kwon tweeted as the scandal erupted.
Major investors lost billions of dollars, although after all they knew the risk they were taking as they have an army of analysts and cryptographers who thoroughly study every investment.
The problem, as always, is for small investors, ie people who – without understanding the algorithmic intricacies – trust something that theoretically allows them to make easy money.
On a Reddit social networking forum, some users posted their struggles and even shared suicide prevention phone numbers.
“I felt like I was going to die”
A desperate man is arrested after visiting Do Kwon’s house after the double rooms collapse.
He told the BBC his life was in tatters.
photo credit, News1
The photo shows how ‘Chances’ leaves the police station after being interrogated.
“I felt like I was going to die,” said the user known as Chancers.
“I’ve lost quite a bit of money in a short period of time. About $2.4 million of my cryptocurrencies are gone.”
Others, however, instead of losing money, got rich by withdrawing their investments before the crash.
For example, Martin Baumann, co-founder of CMCC Global, a Hong Kong-based venture capital firm, said his firm sold its currency in March for about $100 each, according to The New York Times.
While it may seem hard to believe, a few days ago, Do Kwon announced the relaunch of its moon coin, version 2.0.
photo credit, Twitter
But now the businessman has opted for a low profile and no longer speaks in public.
Perhaps because of the lawsuits that some victims of the collapse of their twin currencies will bring. Maybe because it’s trying to rearm with a different strategy this time.
Anyway, in the few days of Luna 2.0’s life, the results indicate that this time it will be much more difficult to convince the world of his genius.