Home The Cointelegraph Top 100 2023 Do Kwon

#81

Do Kwon

Co-founder and CEO of Terraform Labs

ReDeFining the meaning of “stable” coin

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“Many of you lost a lot of money in UST — for this, I am sorry. While the system was transparent and open source, I, as its creator, should have understood and communicated its risks better.”

Biography:

Do Kwon is a South Korean crypto entrepreneur who co-founded Terraform Labs in 2018 and led the company as its CEO. Once revered as an important cryptocurrency proponent, the collapse of Terra and its algorithmic stablecoin, TerraUSD, saw Kwon become an outcast currently wanted by authorities in South Korea. Terraform Labs operated the Terra blockchain ecosystem, which was powered by its native LUNA token. In May 2022, the Terra ecosystem imploded as its algorithmic stablecoin pair UST/LUNA depegged, seeing both tokens plummet in value. The event sent shockwaves through the industry, leading to high-profile bankruptcies of cryptocurrency lending firms. 

Kwon’s efforts to stabilize the once popular Terra ecosystem were largely unsuccessful, and the embattled co-founder has since found himself in the cross-hairs of South Korean authorities. As investigations continue into the collapse of Kwon’s empire, the crypto entrepreneur has been hard to pin down. 

Kwon is a Stanford University graduate who specialized in computer science and is proficient in numerous programming languages, including C++, Java and Python. He has been involved in a number of blockchain projects, including the likes of Anchor and Mirror protocols, which have had their own issues through 2022. Kwon was active on social media up until December 2022, commenting on the collapse of cryptocurrency exchange FTX, alleging that the company had played a role in the destabilization of UST/LUNA in May 2022.

Kwon’s 2022:

2022 was touted to be a good year for the Terra ecosystem. The company launched Luna Foundation Guard, a nonprofit organization, investing over $4.1 billion that was intended to stabilize the volatility of LUNA by backing it with TerraUSD. Nevertheless, the ecosystem began to unravel in May 2022 as the mechanism maintaining UST’s $1 peg to its corresponding LUNA token pair came undone. 

In a perfect storm of sorts, massive sell pressure of UST saw its price shift below the $1 threshold, creating an arbitrage opportunity with LUNA. UST’s and LUNA’s supply pools adjust up or down accordingly so that a $1 UST redemption equals $1’s equivalent of LUNA. In May, UST’s price fell well below $1 due to a sell-off of UST tokens, leading traders to convert UST to LUNA tokens to net a profit. But a cascading effect ensued, driving the value of both tokens sharply downward and subsequently wiping out billions of dollars of value.

The demise of the protocol wrought havoc on the cryptocurrency ecosystem, with firms like Three Arrows Capital, which had huge stakes in UST, forced into bankruptcy as a result of the system’s implosion. The market contagion also decimated now-bankrupt crypto lending firms Celsius and Genesis, which played a role in the high-profile implosion of cryptocurrency exchange FTX. Kwon’s efforts to resurrect the platform led to the creation of Terra 2.0, which in part began repaying the losses of original UST/LUNA users in the past through the launch of the new ecosystem. 

Kwon’s 2023:

South Korean authorities believe Kwon resides in Serbia, with an arrest warrant from his native country hanging over his head from 2022. The Terra co-founder hasn’t been active on Twitter since December 2022 either, while an Interpol Red Notice threatens to have him detained and extradited back to South Korea.

Meanwhile, Terra 2.0 continues to operate as a fork from the original protocol, now known as Terra Classic. The platform continues to roll out new services into 2023 focused on cross-chain integrations. Meanwhile, Kwon is bound to have some influence in the cryptocurrency space in 2023. While South Korean authorities continue to investigate Terra’s collapse, the ongoing fallout of FTX may also shed light on whether the firm had any influence on the sale of UST tokens that led to the algorithmic stablecoin’s collapse in 2022.