A portion of the Ethereum community is pressuring the Ethereum Foundation to make decisions that may “break the entire social fabric” of the smart contract network by restricting Ethereum’s layer-2 (L2) networks, Polygon co-founder Sandeep Nailwal said.

Speaking during a March 28 episode of Cointelegraph’s Chain Reaction show on X, the Polygon founder said that he has only seen this type of pressure and anti-L2 rhetoric during the current market cycle amid suppressed price action for Ether (ETH).

https://t.co/PjkmKIcamv

— Cointelegraph (@Cointelegraph) March 28, 2025

“Everybody understands that if Ethereum doesn’t survive, the layer-2s won’t survive,” Nailwal said, adding:

“The Ethereum community should not pressure the developers enough — I should not be able to pressure the developers enough — for price movements and all that, they may end up making a decision that completely breaks the social fabric of Ethereum.”

The Polygon co-founder praised Vitalik Buterin’s leadership and his more active role in the Ethereum Foundation, saying he has been the biggest force in keeping Ethereum’s ecosystem cohesive.

Nailwal characterized Buterin as the “DNA” of the network that has attracted many talented developers over the years who are building layers on top of the Ethereum base layer.

The total value secured across Ethereum’s scaling solutions. Source: L2Beat

Related: Getting crypto out of the ‘AOL era’ — Sandeep Nailwal

Settlement layers vs execution layers

According to Nailwal, the layer-1 vs layer-2 dichotomy is the wrong way to think about blockchain networks.

The Polygon founder defined only two settlement layers in all of crypto, Bitcoin and Ethereum, with all other crypto networks being execution layers.

In the future, almost every application will have its own blockchain to avoid paying gas fees and will post final transactions to one of these settlement layers, Nailwal said.

Ethereum’s base layer will benefit from this explosion of execution layers, accruing value from these final settlements and promoting the long-term growth of the ecosystem, which will one day be seamlessly interoperable.

Ethereum base layer fees drop following the Dencun upgrade. Source: The Tie Terminal

Critics of Ethereum’s execution layers say that the scaling networks are currently cannibalizing the base layer, which culminated in a 99% drop in Ethereum L1 revenue by September 2024.

Nailwal concluded that due to these differences between settlement and execution layers, no other crypto network is real competition for Ethereum except the Bitcoin network.

However, the only way the Bitcoin network could be a threat to Ethereum is if it adopted more advanced scripting options that give it reliable, smart contract functionality like Ethereum, Nailwal said.

Magazine: Ethereum L2s will be interoperable ‘within months’: Complete guide

Terraform Labs — the company behind LUNA (LUNA) and algorithmic stablecoin TerraUSD (UST) — will launch its crypto loss claims portal on March 31. The portal is aimed at reimbursing individuals who lost at least $100 due to the collapse of the Terra ecosystem in 2022.

The move follows a Delaware court’s approval for Terraform Labs to wind down operations. The judge overseeing the case agreed with Terraform Labs’ bankruptcy plan, calling it a “welcome alternative” to further litigation over investor losses.

Terraform Labs settled with the US Securities and Exchange Commission (SEC) in June 2024 for $4.47 billion.

To be eligible for reimbursement, claimants must submit a claim and supporting documentation through the crypto loss claims portal by 11:59 pm ET on April 30. Claims under $100 will not be accepted.

There are two types of evidence that claimants can submit: manual and preferred. Manual evidence includes transaction logs, account statements, and screenshots. Preferred evidence refers to read-only API keys. It is considered preferred for being the most accurate and reliable data, especially for users of major exchanges.

In its announcement, Terraform Labs warned that claims submitted with manual evidence “will likely be subject to a protracted review process” and may be disallowed if preferred evidence is also available.

The company estimates it could pay from $184.5 million to $442.2 million to investors and stakeholders, though it noted that the total amount of eligible crypto losses remains difficult to determine.

Terraform Labs’ fall from grace

In June 2024, Terraform Labs announced that it would cease operations and transfer control of the Terra blockchain to its community. The entity planned to sell key projects in the Terra ecosystem and burn unvested and vested holdings.

Before its dramatic collapse, Terraform Labs presided over a $45 billion ecosystem involving its algorithmic stablecoin and the LUNA token. Do Kwan, the founder of Terraform Labs, was later arrested in Montenegro and extradited to the United States, where the US Justice Department has charged him with eight felonies.

The collapse of the Terra ecosystem sent shockwaves through the crypto community. At that time, Bitcoin (BTC) lost 37% of its value in 30 days, falling $19,000.

Kwon’s US court hearing has been delayed until April 10 as prosecutors are reviewing a swath of new evidence. 

Related: Terraform Labs and Do Kwon found liable for fraud in SEC case

For years, Cardano (ADA) has been a cornerstone of the crypto landscape, consistently ranking among the top digital assets by market capitalization. Yet, despite its prominence, ADA’s performance has left many investors questioning its long-term prospects.

While it recently made headlines for being included in US President Donald Trump’s initial proposal for a national crypto stockpile, its price action and onchain activity tell a different story — one that has even led some critics to brand it a “zombie.”

Recent findings suggest that the ecosystem behind ADA, the Cardano network, lags significantly behind in decentralized finance (DeFi) adoption. With only a fraction of the total value locked (TVL) compared with Ethereum and Solana, Cardano struggles to attract liquidity and stablecoin activity.

While some argue that its DeFi sector is still in its early stages, several newer blockchains have outpaced it in user engagement and trading volume. The question now is whether upcoming developments can reverse the trend.

With key catalysts on the horizon, such as a potential ADA exchange-traded fund (ETF) and its emerging role in Bitcoin’s DeFi ecosystem, 2025 could be a pivotal year for ADA. But will these developments be enough to turn the tide?

To uncover the full story and explore the current state of Cardano’s native token, watch the full video now on the Cointelegraph YouTube channel!

Coinbase’s emergence as the Ethereum network’s largest node operator raises concerns about network centralization that could worsen as institutional adoption accelerates, industry executives told Cointelegraph. 

On March 19, Coinbase published a report disclosing that the US cryptocurrency exchange controlled more than 11% of staked Ether (ETH), more than any other Ethereum node operator. 

According to Karan Sirdesai, CEO of Web3 startup Mira Network, Coinbase’s growing dominance highlights “a systemic issue in Ethereum’s staking architecture.”

“We’re creating a system where a handful of major players control an outsized portion of network security, undermining the core promise of decentralization,” Sirdesai told Cointelegraph.

According to the report, Coinbase controlled 3.84 million ETH staked to 120,000 validators, representing 11.42% of staked Ether as of March 4. 

Liquid staking protocol Lido controls a larger share of staked Ether overall — approximately 9.4 million ETH, according to Lido’s website.

However, Lido’s staked Ether is distributed across dozens of independent node operators, Anthony Sassano, host of The Daily Gwei, said in a March 19 post on the X platform.

To limit risks, Coinbase spreads staking operations across five countries and employs multiple cloud providers, Ethereum clients, and relays, according to its report. “Diversification at the network level and the overall health of the network is always a priority for us. That’s why we periodically check network distribution,” the exchange said.

Coinbase is the largest Ethereum node operator. Source: Coinbase

Related: Ether ETFs poised to surge in 2025, analysts say

Impending centralization risks

Ethereum’s network concentration could worsen if US exchange-traded funds (ETFs) are permitted to begin staking — a priority for asset managers such as BlackRock.

Coinbase is the largest custodian for US crypto ETFs and holds ETH on behalf of eight of the nine US spot Ether funds, the exchange said in January. 

“This type of network consolidation brings with it increased risk of censorship and reduced network resilience,” Temujin Louie, CEO of Wanchain, a blockchain interoperability protocol, told Cointelegraph. 

For instance, high staking concentrations “represent potential points of regulatory pressure… [and] these large staking entities will likely prioritize regulatory adherence over network censorship resistance when faced with difficult choices,” Sirdesai said.

Meanwhile, new US regulatory guidance allowing banks to act as validators for blockchain networks adds to centralization risks, several crypto executives said.

“If too much stake consolidates under regulated entities like Coinbase and US banks, Ethereum will become more like traditional financial systems,” Louie said. 

Conversely, more institutional validators could actually improve staking concentrations. Cryptocurrency exchange Robinhood is especially well positioned to check Coinbase’s staking dominance, according to Sirdesai.

Robinhood already has “the crypto infrastructure, user base, and technical capabilities to move into staking rapidly. They could realistically challenge Coinbase’s position faster than any traditional bank,” Sirdesai said.

Magazine: Ethereum L2s will be interoperable ‘within months’ — Complete guide

The Department of Government Efficiency, or DOGE, led by Tesla CEO Elon Musk is reportedly moving into the United States Securities and Exchange Commission (SEC).

According to a March 28 Reuters report, Musk’s DOGE team contacted the SEC and was told it would be given access to the commission’s systems and data. The agency reportedly planned to establish a liaison team to work with the “efficiency” team, whose intentions were not immediately clear.

“Our intent will be to partner with the DOGE representatives and cooperate with their request following normal processes for ethics requirements, IT security or system training, and establishing their need to know before granting access to restricted systems and data,” said an email to SEC staff, according to Reuters.

US President Donald Trump in January signed an executive order allowing DOGE to implement cost-cutting measures, claiming efforts “to save taxpayers money.” However, many of Musk’s efforts — including attempting to fire staff at the US Agency for International Development, or USAID, and shutting down the watchdog Consumer Financial Protection Bureau (CFPB) — face lawsuits in federal court from parties alleging DOGE’s actions were illegal or unconstitutional.

Related: Can the law keep up with Musk and DOGE?

Many federal officials and lawmakers have expressed concern with Musk’s team’s seemingly “move fast and break things” approach to government. In his purge of the US government, he has allegedly fired thousands of federal workers, most of whom were ordered to be reinstated after a judge’s order on March 13. It’s unclear whether the DOGE team has the same plans for the SEC.

Cointelegraph spoke to SEC Commissioner Hester Peirce, who declined to comment on the report or confirm if she had received a similar email. Cointelegraph contacted Acting SEC Chair Mark Uyeda and Commissioner Caroline Crenshaw but did not receive a response at the time of publication.

Is new leadership coming to the SEC?

The US Senate Banking Committee will likely soon take a vote on whether to advance the nomination of Paul Atkins, Trump’s pick to chair the SEC. At a March 27 confirmation hearing, Atkins said he would “definitely” be willing to work with DOGE if confirmed as an SEC commissioner. Lawmakers also questioned his potential conflicts of interest with the crypto industry.

Magazine: SEC’s U-turn on crypto leaves key questions unanswered

Opinion by: Eran Barak, CEO at Midnight 

It’s been almost 16 years since blockchain emerged from its esoteric fringes to enter global discourse, evidenced most recently by continued backing from Wall Street incumbents. Despite this remarkable ascendancy, the unfortunate truth is that this technology has yet to realize its true business potential. A core challenge persists: Too much sensitive data remains publicly unshielded.

The crux of the issue is that companies must keep business data confidential, and people strive to safeguard their personal information as best they can. Once data is put on a public blockchain, however, it becomes irreversibly and indefinitely exposed.

Even if a business takes every possible precaution to conceal data, mistakes made by others or vulnerabilities in the system can expose sensitive onchain data or metadata, including participants’ identities. This can lead to privacy breaches, compliance violations or both, undermining the foundational assumption that blockchain is trusted and underscoring the importance of robust measures to protect sensitive data.

On the other side of that coin, concealing activity on a blockchain can open the door to money laundering, triggering negative government responses. Instances in which this has occurred have led to a false impression that governments oppose Web3 privacy, a criterion businesses fundamentally need for them to adopt the technology. 

From whichever angle we look at it, maintaining privacy onchain is a real and complex issue for Web3. Until we solve it, businesses will not and should not be expected to cross the chasm. 

The belief that governments oppose privacy on the blockchain is wrong

Web3 entrepreneurs have grown to fear that building decentralized applications and businesses that provide financial anonymity could land them in regulatory trouble. Just look at Samourai Wallet, whose co-founders were charged with money laundering, or Tornado Cash, whose developer was sentenced to 64 months in prison for similar reasons. 

These responses have led to a consensus that governments are opposed to privacy altogether when it comes to blockchain. 

Recent: AI agents and blockchain are redefining the digital economy

This couldn’t be further from the truth. Governments don’t oppose privacy but mandate it across industries. Data protection laws, like the General Data Protection Regulation or the Health Insurance Portability and Accountability Act, are in place to ensure businesses protect our customer data from misuse and security threats.

The real issue these high-profile cases reveal is that Web3 measures to protect data have created opportunities for misuse, enabling the facilitation of criminal activities that have understandably raised serious concerns on behalf of governments. Blockchain data protection capabilities should not undermine established cross-jurisdictional laws safeguarding the global community from terrorism, human trafficking, fraud and other criminal offenses. 

This begs the question: What does privacy, done right, look like?

Selective disclosure

When it comes to using blockchain, protecting sensitive data is typically accomplished by either keeping the data offchain, or encrypting data onchain. The latter is not durable privacy given quantum computing’s rapid advances in cracking encryption. 

The advent of zero-knowledge (ZK) technology, a complex cryptographic technique, allows users to ensure sensitive data remains offchain by sharing attestations about the validity of the data instead. In Web3, ZK has emerged as a transformative way to enhance privacy as it enables untrusted parties to validate that a transaction has occurred without sharing any information about the transaction. 

Decentralized applications can exercise selective disclosure by choosing between putting data onchain (full disclosure), putting it onchain with encryption (disclosure via viewing keys) or using ZK to only publish attestation about the data (offering utility without any disclosure). Selective data disclosure only solves half of the puzzle. It was not designed to account for metadata.

The next privacy frontier

Metadata, the information surrounding our data, is an under-discussed component of blockchain’s exposure of sensitive information; it can be used to make inferences, creating an added layer of vulnerability even when the data itself is concealed. 

For example, through transaction metadata, investment and trading strategies can be inferred in addition to other behavioral patterns. For businesses, the implications of this can be detrimental to their growth and ability to stay ahead of competitors. They can’t afford to have trade secrets and strategies, or even the identities of other parties they are transacting with, made public.

The need to protect metadata and remove the ability to make inferences is paramount to security and can be addressed using a private token. Such capability can, however, be easily misused for money laundering.

If using a private token is not the solution, and using a public token does not provide sufficient levels of confidentiality, then the way to solve this challenge is to rethink Web3’s approach to protecting metadata altogether. We need to combine the benefits of both approaches, effectively creating a dual-asset system in which a public and a private token are used. Each asset functions independently, meaning specific restrictions can be placed to prevent illicit activities such as money laundering while retaining all the benefits.

A powerful framework

The dual-asset system enables confidentiality without the ailments shielding metadata usually brings, making compliance and business policy enforcement possible. By combining this tokenomics structure with selective disclosure, privacy and regulatory compliance can coexist on the blockchain, which will have resounding effects on adoption and innovation.

Opinion by: Eran Barak, CEO at Midnight.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Blockchain developer platform Gelato is launching a new blockchain-as-a-service solution on Avalanche to meet the growing demand for sovereign blockchain infrastructure during a crucial “tipping point” for institutional adoption.

Gelato, which previously developed blockchain solutions for companies such as Kraken and Animoca Brands, unveiled the new upgrade that aims to let developers deploy fully sovereign chains faster and cheaper with full interoperability via Avalanche InterChain Messaging (ICM).

Gelato emphasized that its service is ideal for advanced applications such as financial technology (fintech) requiring identity verification (KYC) and specialized gaming economies, according to a March 28 announcement shared exclusively with Cointelegraph.

The service lets companies quickly deploy independent (“sovereign”) blockchains with fewer costs and faster launch times.

Luis Schliesske, founder of Gelato, said previously launching a blockchain required extensive technical knowledge and significant engineering resources. Gelato’s new product reduces the complexity involved. He told Cointelegraph:

“Gelato’s RaaS on Avalanche streamlines everything from deployment and upgrades to real-time monitoring and scaling. It’s a plug-and-play solution that slashes time-to-market and operational burden bringing AWS-level infrastructure to the rollup era.”

“The future of enterprise blockchain is sovereign, interoperable, and invisible to the end-user,” he added.

Related: BlackRock Bitcoin ETP ‘key’ for EU adoption despite low inflow expectations

The new solution will enable one-click layer-1 (L1) network deployment on Avalanche and leverage key network advancements such as dynamic fees and the removal of the Avalanche (AVAX) token staking requirements.

“Avalanche L1s mark a paradigm shift in blockchain infrastructure, enabling a future where every application can run on its own sovereign chain, optimized for its unique needs,” according to Martin Eckardt, senior director of developer relations at Ava Labs.

Total value locked, all chains. Source: DefiLlama 

Avalanche is the industry’s 10th largest blockchain network, with over $1.1 billion in total value locked (TVL) across its DeFi applications, DefiLlama data shows.

Related: Fidelity plans stablecoin launch after SOL ETF ‘regulatory litmus test’

Reliable infrastructure is a “prerequisite” for institutional crypto adoption

The crypto industry is at the “tipping point” for institutional blockchain adoption, with increasingly more financial institutions looking to adopt the technology.

However, financial institutions need more robust infrastructure to have the confidence to adopt blockchain and more crypto offerings, Schliesske said, adding:

“Institutions will not build on crypto infrastructure that feels experimental or unreliable. […] That reliability is a prerequisite for onboarding financial institutions, governments, and large enterprises.”

Fox News and eBay are some of the most prominent brands that have launched blockchain-based solutions on Gelato’s development platform.

Magazine: Ex-Alameda hire on ‘pressure’ to not blow up Backpack exchange: Armani Ferrante, X Hall of Flame

Community members backing a Broccoli memecoin on BNB Chain are outraged, claiming their project was unfairly denied victory in the network’s liquidity support program.

The BNB Chain Meme Liquidity Support Program, which kicked off on Feb. 18, offers $200,000 in permanent liquidity to the top-performing memecoins on the chain. But controversy erupted on day two of the competition on Feb. 19 when two memecoins — both inspired by Binance founder Changpeng Zhao’s dog Broccoli — went head-to-head.

In the end, the Broccoli token ending in address “714” was declared the winner over the one ending in “F2B.” However, supporters of the F2B token say the result doesn’t add up.

Related: BNB Chain scales up network as memecoin activity boosts transaction load

F2B Broccoli community investigation questions score

According to the official leaderboard, both tokens earned a daily score of 5.7 in a system where lower is better. Per competition rules, a tie is broken by comparing trading volume, and 714’s token had the edge in that category.

Feb. 19 ranking for BNB Chain’s meme liquidity competition. Source: BNB Chain

But an investigation conducted by the latter’s community now questions whether the 714 Broccoli token deserved the crown.

In a video posted by the F2B community viewing the back-end data, their “BROCCOLI” token, with a token symbol in all caps, ranked first in its calculated daily score.

Community members discovered their token ranked second publicly, even though it came first in back-end data. Source: F2B BROCCOLI community

They then move to analyze the back-end data of the 714 Broccoli token (spelled without all caps), which had a daily score of 5.700000000000001 and ranked second.

Rival Broccoli token ranked second in back-end data. Source: F2B BROCCOLI community

The F2B community also attempted to calculate the scores themselves based on the formula cited by BNB Chain in a Feb. 14 blog post, and again in a Feb. 18 X post:

“Score = (Market Cap Rank × 30%) + (24h Price Change Rank × 20%) + (24h Volume Rank × 50%)”

Under that rubric, F2B appeared to have a clear edge — 5.5 points compared to 714’s 5.9 points.

Related: BNB Chain flips Solana in daily fees, beats out all chains

BNB Chain claims score is legit

In a detailed response to the community inquiry shared with Cointelegraph, BNB Chain said that the community’s calculations relied on deprecated metrics. The actual scoring formula used by BNB Chain reflects:

init_price_change_rank

market_cap_rank

acc_volume_rank

The community’s calculation relied on the deprecated “percent_change_24h_rank” and “volume_24h_rank.” When recalculated under the updated formula, both tokens scored 5.7 — making the official tie-breaker (volume rank) valid, according to the network. BNB Chain said the deprecated dimensions were removed on Feb. 21 to “prevent miscalculations by the community.”

BNB Chain said the community relied on metrics that aren’t part of the official ranking formula. Source: BNB Chain

BNB Chain also dismissed concerns about the overly precise 5.70000001 score, saying it was simply a result of floating-point deviations caused by the IEEE 754 standard and held no reference value for the actual score.

Despite the clarification, many in the F2B camp remain unconvinced, arguing that the rules lacked transparency and shifted mid-competition.

Magazine: Bitcoiner sex trap extortion? BTS firm’s blockchain disaster: Asia Express

The XRP (XRP) market is flashing warning signs as a bearish technical pattern emerges on its weekly chart, coinciding with macroeconomic pressures from anticipated US tariffs in April.

XRP descending triangle pattern hints at 40% drop

Since its late 2024 rally, the XRP price chart has been forming a potential triangle pattern on its weekly chart, characterized by a flat support level mixed with a downward-sloping resistance line.

A descending triangle pattern forming after a strong uptrend is seen as a bearish reversal indicator. As a rule, the setup resolves when the price breaks below the flat support level and falls by as much as the triangle’s maximum height.

XRP/USD weekly price chart. Source: TradingView

As of March 28, XRP was testing the triangle’s support for a potential breakdown move. In this case, the price may fall toward the downside target at around $1.32 by April, down 40% from current price levels.

XRP’s descending triangle target echoes veteran trader Peter Brandt’s prediction. He warned of a possible decline to as low as $1.07 due to a “textbook” head-and-shoulders pattern forming on the daily chart.

XRP/USD daily price chart. Source: Peter Brandt

Conversely, a rebound from the triangle’s support level could lead the price toward its upper trendline at around $2.55. A clear breakout above this resistance level risks invalidating the bearish structures altogether, instead sending the price toward the previous high of $3.35.

Trump tariffs could amplify XRP sell-off

The broader market, meanwhile, has turned increasingly cautious in response to President Donald Trump’s 25% tariffs on auto imports, set to go live on April 3.

These tariffs are likely to result in higher prices for US manufacturers and consumers. The February 2025 US CPI report already showed a 0.2% month-over-month increase.

Related: Is altseason dead? Bitcoin ETFs rewrite crypto investment playbook

St. Louis Federal Reserve President Alberto Musalem estimated that these tariffs might contribute approximately 1.2 percentage points to inflation, with about 0.5 percentage points stemming from direct effects and 0.7 percentage points from indirect effects.

According to the CME FedWatch Tool, the probability of the Federal Reserve cutting rates to a target range of 400–425 basis points in June has fallen to 55.7% as of March 28, down from 67.3% a week earlier and 58.4% just one day ago.

Target rate probabilities for the June Fed meeting. Source: CME

A delayed rate cut would reduce the flow of capital into speculative markets, stalling momentum for XRP and other digital assets that thrive in a low-rate, risk-on environment.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Michael Novogratz’s crypto investment firm Galaxy Digital agreed to pay $200 million in a settlement related to its alleged promotion of the now-collapsed cryptocurrency Terra (LUNA)

According to New York Attorney General’s Office documents filed on March 24, Galaxy Digital acquired 18.5 million LUNA tokens at a 30% discount, then promoted them before selling them without abiding by disclosure rules. The filing states:

“Ultimately, Galaxy helped a little-known token increase its market price from $0.31 in October 2020 to $119.18 in April 2022, while profiting in the hundreds of millions of dollars.“

As part of the settlement agreement, Galaxy will pay $200 million in monetary relief over three years: $40 million within 15 days, another $40 million within one year, and two additional payments of $60 million due within the second and third years, respectively.

Related: A beginner’s guide on algorithmic stablecoins

Galaxy Digital reportedly spread fake news

The filing also accused Galaxy Digital and Novogratz of spreading false claims about Terra’s usage. In particular, the firm allegedly stated that the South Korean payments app Chai was built on the Terra blockchain, which was not accurate.

This claim was also included in a press release sent to Bloomberg highlighting that the app “hosts over 2 million users and generates $1.2 billion in annualized transaction volume.” The release reads:

“These statements were false. They were based on representations by Kwon and Terraform to Galaxy, but Galaxy failed to independently verify them.“

Galaxy Digital’s Novogratz mentions Terra usage in Chai following Terra’s collapse. Source: Galaxy Digital

Related: Terra’s Do Kwon’s US court hearing delayed as prosecutors review a swath of new evidence

Terra’s collapse and market fallout

Terra and its algorithmic stablecoin, TerraUSD (UST), both experienced a dramatic collapse due to a breakdown in the mechanism designed to maintain UST’s peg to the US dollar back in May 2022. The event occurred when a large holder sold a substantial amount of UST.

The large sell-off triggered market panic, causing UST to deviate from its expected value. The mechanism intended to stabilize UST involved minting new LUNA tokens to buy back UST, resulting in massive LUNA supply inflation and creating intense downward pressure on LUNA’s price.

As Cointelegraph reported at the time, if the market cap of LUNA became lower than that of UST, there would not be enough funds to maintain the peg of the stablecoin. With the asset backing the stablecoin losing value as its supply continued to increase, the assets entered a self-reinforcing spiral, which caused both assets to lose nearly all their value within hours.

This wiped out billions in market capitalization and triggered a broader cryptocurrency market downturn. The memory of the event is still fresh, with the Sonic blockchain’s recent unveiling of a high-yield algorithmic stablecoin being met with fears due to perceived similarities.

Magazine: Bitcoiner sex trap extortion? BTS firm’s blockchain disaster: Asia Express