In 1997, George Soros, a finance legend, with his financial giant allies aimed at the Southeast Asian market in a bubble and in an encirclement, they quickly drained $30 billion in foreign exchange reserves from the Bank of Thailand, which ultimately led to a financial crisis. crisis in Southeast Asian countries. In 2008, Wall Street giant Lehman Brothers filed for bankruptcy in court because its net debt exceeded the company’s market value many times over due to a large amount of bad debt, which had a devastating impact. on the modern financial system. Who can imagine that those allusions to the financial hunt that everyone remembers were again staged in the crypto market after decades? And in a very short time, he destroyed the whole market, leaving many people in danger.
On May 10, 2022, Terra USD(UST), “the algorithmic stablecoin” dropped to a low of $0.6 due to the severe unpeg (current price is below $0.1). The world’s second-largest public blockchain ecosystem, which once ranked among the top five in the crypto market by peak market value, repeated in two days the capital encirclement that was hard for investors to imagine. traditional finance over the past few decades.
The origin of the epic crash
On May 8, Terra announced that it would adjust the UST-3Crv liquidity pool to prepare for the formation of a stronger 4Crv pool. At the same time, the Federal Reserve raised interest rates by 0.5%. The various favorable conditions paved the way for the encirclement of the predators of capital. With the adjustment of Terra’s official UST-3Crv cash pool withdrawal on May 8, the UST-3Crv pool was in an extremely low state. Soon, most of the USTs in the market were sold to a new address in a very short time, which significantly tipped the scales of the 3Crv pool. Meanwhile, the sharp sell-off of BTC in the market caused great panic. In order to facilitate the intense unpecking of the UST, Terra officials had to sell the BTC storage in their hands in order to buy a large amount of UST to stabilize the 3Crv pool. With Terra officially selling off BTC on a massive scale, the market panic escalated even further. Although the UST-3Crv pool was rebalanced, the liquidation of Bitcoin further deteriorated the market and led to the large-scale liquidation of Luna. The UST sell pressure increased further and the UST-3Crv pool quickly fell into an unbalanced state.
After the severe accident of UST, this death spiral also heralded the end of the Terra public channel to the world after several consecutive days of plummeting due to the link between LUNA and the particular economic structure of UST in the Terra ecosystem. In fact, there were serious problems in the design of Luna and UST’s budget models from the start. The economic model similar to the sawtooth shape was very easy to switch. Once there was something wrong on one side, the whole ecology disintegrated and this most likely produced an irreversible effect in a short time, which created favorable conditions for the encirclement of the giants of cryptography.
After analyzing the Terra incident, one can see that a failing business model is doomed to tragedy from the start. Last year, Axie Infinity collapsed as it grew rapidly in a short period of time.
Axie’s economy is based on three main resources:
- in-game cryptocurrency SLP
- Axies that exists as an in-game item and NFT on the Sky Mavis blockchain
- and AXS, the “governance token”
The game produces two of these resources in ever-increasing quantities. SLP is earned through player battles, and until recently, it could also be obtained by completing daily tasks and grinding in single-player, which is like printing money and giving it to players in large quantity. Axie can reproduce multiple times and create new offspring, so she’s basically immortal. Breeding increases the number of NFTs. “From a macro perspective, gamers have created a positive feedback loop,” said Mihai Gheza, co-founder and CEO of Machinations, a consulting firm that tests game economics with computer-based simulation software. large scale. Players will generate SLP with Axie and SLP will generate more Axie, and Axie will bring more players who generate SLP into the game. “It’s a guaranteed way to create inflation.” Jon Jordan, blockchain gaming consultant and first user of Axie Infinity, believed that the popularity of the scholarship model was exacerbating Axie Infinity’s difficult financial situation. Sharing is one of the game’s main innovations. However, as its appeal grew, a large group of full-time players focused on producing and recycling as many SLPs as possible. “He’s a victim of his own success,” Jon Jordan said. “The game’s economy may be out of balance, but if there was no plan for the imbalance on one side, it would be scary to suddenly lose balance.”
As Axie Infinity tries new economic wells, it may end up against the wishes of gamers who take cryptocurrency withdrawal (rather than the enjoyment of playing the game itself) as the purpose of the experience. It can also be seen from a certain point of view, Axie Infinity has had the problem of survival bias with the design of the economic model from the beginning. Due to the improper business model, Axie Infinity eventually crashed.
Interstellar Domain Order (IDO) | How to get through adversity
In the first half of this year, with the development of the market, a classic interstellar chain game called Interstellar Domain Order (IDO) caught the attention of users, and in the following months, this game was proven to be in line with the current sentiment of the interstellar metaverse has stood the test of the market. Through on-chain data analysis from May 10-12, even in the darkest days of the entire crypto market, the project’s wave ratio showed extremely small fluctuations. Even though the crypto market has fallen, IDO has just shown an upward trend, which benefits from its complete ecological loop and reasonable economic buffer zone. According to official reports, the founding team of Interstellar Domain Order (IDO) relinquished effective control of the liquidity pool at the time of the project’s launch, and left it to the users, which perfectly matched the most popular concept. of DAO, namely the concept of self-governance and the regression of use-value. At the same time, according to the IDO white paper, 5% of the tokens will be destroyed in each IDO transaction and automatically sent to the black hole address. The deflation caused by the obligatory combustion ensures the stable rise of the symbolic price. According to channel data, the authority of the liquidity pool has been locked until 2140, so theoretically no one has the right to use the funds of the liquidity pool, which also guarantees the safety of the funds while throughout the development process. of the project.
According to on-chain data over the past two months and official leaked information, the Interstellar Domain Order (IDO) team is developing steadily as expected. Its chief technology officer, George Brown, once revealed in the official external interface:
“Interstellar Domain Order is a masterpiece of the team’s painstaking efforts, and we will grow step by step according to our original plan, although many people wonder if IDO will be affected and have root issues as the entire crypto market is still in a I would like to say that any great success in history is not an accident but the inevitable result of effort and dedication in the segmented field.Therefore, we don’t We will not stop our steps or change any decision because of a certain black swan. We aim to provide users with an innovative and extraordinary experience with the game’s immersive ecology. We deeply know what we want and go for it. is our answer.
Although the market is still falling, there is no denying that each failure will breed the next success. Whether it’s Terra or Axie Infinity, the best projects of the past show us that in the field of crypto, nothing is set in stone. It is only through constant change that we can create what tends to remain the same. Great success means nothing, only countless great successes mean real success. After all, any great project in the crypto market relies on two decisive factors of its business model: rationality and implementation. We’ll be waiting to see if Interstellar Domain Order can make a breakthrough in the days ahead.