Crypto's most controversial founder finally speaks, and tries to move on

In just 72 hours, the entirety of his $45-billion empire had collapsed.

It was unlike anything ever seen in crypto and the founder at the center of it all took more than three months reflecting on the wreckage before finally deciding to speak on-camera to reveal what actually happened.

In a new, two-part interview for the community-owned Web3 show Coinage, Terra founder Do Kwon sat down with me to explain that things weren't as simple as some have made them out to be.

" I think a lot of the commentary focuses on wait, like, why did people choose to build this thing in the first place? It must be a fraud. It must be a scam," he said, searching for what words he'd use to describe what led to failure. "It could be overconfidence. It could be not having the right background knowledge. It could be markets being too volatile. It could be a lack of regulation —but it's probably all those things and none of those things at the same time — it's just the reality of it is we tried to build the best currency in the world and it just didn't work."

For anyone who has followed Terra as closely as I have, you'd know that all of those things are totally fair reasons it could have collapsed from crypto darling to facing allegations of fraud. But you'd also know not even all of those things would even be scratching the surface.

Terra founder Do Kwon spoke to Coinage for his first interview since the crash of his stablecoin UST and his cryptocurrency LUNA. (Source: Coinage)

I didn't want to write this newsletter to rehash what Coinage's Part I interview or its 8,000-word story already cover, including a contested back and forth over whether Kwon is fairly being characterized as "Crypto's Elizabeth Holmes," or how the situation to save Terra led to seven all-nighters for the embattled founder, or even what the experience meant to him as a father who named his own daughter "Luna" after his failed cryptocurrency.

But, I will spend this newsletter focusing on the things uncovered in the second part of the interview, which has gotten far less media attention (quite possibly, again, because it's also so misunderstood.)

What we learned about LUNA 2.0

For starters, it's obvious that Do Kwon has every intention of building the Terra ecosystem back up from the ashes. What's been less obvious is what kind of resources either he or TFL have to make that happen.

While Do declined to reveal the monetary standing of Terraform Labs, (the parent company behind the creation of the first Terra blockchain, and in full-disclosure also an investor in Coinage's parent company) he did give insight into what remains of his tech team.

"Most of Terraform Labs is still intact," Do tells me. "We lost a lot of executives during the crash, but in terms of like the overall headcount, we lost a total of two devs."

Given the collapse, (which also impacted employee token vesting) that's pretty wild to think about. I was a little shocked to hear that.

"If our previous slogan was, 'a decentralized economy needs decentralized money,' my thinking has shifted a little bit," he said. "I think in some sense, like decentralized money needs a decentralized economy just as much."

As such, Kwon tells me he's looking to build all kinds of economic products based off of what people are already consuming in the offline world, into the online world. If that sounds abstract, I don't know what to tell you. To be honest, I wish I had more to describe than that, but it sounded like Do was still figuring out what that meant for himself. It wasn't entirely reassuring to me as someone who has been stuck trying to figure out what to do with my LUNA 2.0 tokens that came as a result of the post-collapse Terra fork back in May.

But, the fact that people who lost their money in Terra have LUNA 2.0 to think about is weirdly a bit of a distinguishing hope relative to the other crypto collapses that followed. The outlook for Celsius users ever seeing any of their deposits looks bleaker every day. Same for people who put money into Voyager. But, LUNA 2.0 is already trading and on the market. Of course, it has a major lack of trust overhang it's going to overcome and that is NO SMALL FEAT based on the way everyone attacked Do in his first interview since the collapse.

LUNA 2.0 has mostly traded around $2 since its launch back in May. (Source: CoinMarketCap)

From a branding perspective it was interesting they stuck with the LUNA name. Do Kwon told me he couldn't bring himself to ditch it, but that is already creating a bit of a problem. There are a lot of people who think LUNA 2.0 is destined to exponentially crash to fractions of a penny just like LUNA did in its de-peg event. But obviously, LUNA 2.0 is stripped of any of the stablecoin piece that forced LUNA to be infinitely printed. That's an important thing to note.

The other thing to note is that a lot of it is locked up right now due to the vesting dates on the airdrop. For larger wallets holding above 1 million LUNA, that's locked up until a one-year cliff is hit in May 2023. So if a bull run starts going, that could mean some pretty good support for LUNA 2.0.

The two factors that will continue to weigh on LUNA 2.0 remain the fact that nearly all of the trust in the TFL team, for better or for worse, has basically been lost, and that the public still thinks LUNA 2.0 will suffer the same fate as Terra's first attempt.

But if what Do is saying is true — that the team is intact and will be forging ahead to build apps that once boasted the best user experience in crypto — it's not unthinkable that he could deliver on his mission to rise anew.

It might just be a big leap to assume that without the allure of using Terra to earn 20% interest, the same amount of users might be interested in whatever gets built.

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