Serious question: Isn’t all of DeFi worthless if the Terra project fails?

The most important thing about DeFi is that it’s decentralized. If it were somehow centralized, then everything we are doing here would effectively be pointless.

DeFi is centralized, though. The lifeblood of DeFi, namely stablecoins, is centralized. It is a fact that the United States government could instantly bring DeFi to a screeching halt immediately if they wanted to. All the US has to do is put pressure on Circle, which operates the USDC stablecoin. Imagine what would happen to DeFi if every single USDC coin were instantly frozen. Everything would collapse. The United States government absolutely has the power to immediately destroy DeFi.

This is where Terra comes in. Terra is of course the ecosystem behind UST. UST is a decentralized stablecoin. There is no power on Earth that could instantly freeze every UST. Nothing short of turning off the Internet could instantly freeze every UST. It is actually decentralized, and growing more so by the day.

Terra is by far the biggest, oldest, most decentralized, and most sophistocated decentralized stablecoin. So if Terra fails, how can any other decentralized stablecoin hope to succeed?

I honestly believe that the fate of DeFi rests with Terra. Please prove me wrong. DeFi isn’t really DeFi without decentralized stablecoins, and if Terra fails then it is very difficult to see how any other decentralized stablecoin could be successful.

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16 thoughts on “Serious question: Isn’t all of DeFi worthless if the Terra project fails?”

  1. The good thing about the entire crypto space is it’s always evolving and they’re constantly innovating. You have a point with the statement of DeFi being partly centralized. That said, DeFi is coming to PoW be that Bitcoin or Kaddex, imagine when stables are made off of proof of work models. This literally solves for the question you’re asking.

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  2. Stablecoins will come and go as each have their positives and their constraints (e.g. Maker’s scalability). As long there’s a requirement for Stablecoins, we will have them. But don’t be fooled, it’s not as decentralised as most ppl think anyway. Terraform uses a single oracle to update the prices for LUNA and UST which means it has additional opportunities to regulate UST (as they are the first to see updated price feeds and can front-run any liquidations).

    I’m not bagging on Terra, I haven’t mentioned the Abracadabra or Anchor ponzis they’re mixed up in, but fundamentally, as long as LUNA can maintain a non-zero value and ample liquidity, UST should be OK and the peg should hold.

    It’s a shame but there are still a lot of centralised players and therfore potential “bad actors” in crypto, but 2 things are pretty clear to me: (1) the “perfect” decentralised stablecoin doesn’t yet exist, (2) there isn’t just one answer when it comes to stablecoins. Risk-managed diversification is still of key importance in such a fast-changing yet lucrative space.

    Just my thoughts.

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  3. Liquity’s LUSD is only backed by eth and is pretty large, id consider it the most stable stablecoin because USDC USDT etc. dont affect it

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  4. I am hardcore DeFier with presence on 10 chains. I never touched UST. If it fails, it fails. There is a lot of other stable coins, some centralized, some not.

    I really don’t see it as a MVP in this space.

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  5. if all stablecoins are frozen. then all the money flows into btc. bitcoin will pump much harder. dont u think?

    also i dont think terra is the oldest and most decentralzied and sophiosticated stablecoin. UST has already failed twice or thrice now and was saved coz of the insane treasury and clout the founder of terra has. it can fail again. But defi will continue. the hardcore crypto users anyway never use stablecins they go in and out of btc or eth.

    in fact i myself am staking my long term holds like DAFI GTH PSP FTM WBTC & ETH.

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  6. I don’t think if Terra fails, DeFi fails. The likes of Frax is decentralized too & it’s doing pretty great.

    And there are even others like OUSD, oneUSD, nUSDO being backed by other stablecoins/native assets.

    There’s space for every projects to grow, regardless of what happens to another.

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  7. How do you even come to this conclusion, with the amount of DeFi projects in the industry and lots of solutions they are bringing to the world of finance you make this pointless claim?ūü•≤

    With what projects like ALBT,EGLD and CRV are doing this is an annoying claim.

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  8. LUSD and RAI are better. Also US government would never make usec freeze all funds lol. Most of them are very pro stable coin. They will be regulated but not banned

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  9. Not all defi is on Terra.

    Like TOMB and Matic Staking protocols are solely reliant on MATIC.

    A protocol like Matic Staker allows you gain 8-10% APR daily while limiting your risk to the MATIC chain..

    Website –¬†https://maticstaker.io/?ref=0x70c6dfef3b3ce0322c1337c96772e84fe94319c2

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  10. Terra is basically printing 500M UST by burning some Luna they have. It kind of worries me that they’re basically pumping out Luna to prop up their anchor protocol.

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