As the price discovery process continues and traders of Bitcoin (BTC) and other cryptocurrencies try to figure out where these markets will bottom, it's worth taking a moment to ask why you're still in the game. That's assuming you haven't been liquidated yet.
The UST-LUNA situation will almost certainly end up in the cannons of financial history. Terra's UST was a breakthrough success for algorithmic stablecoins - a type of financial asset that attempts to bridge the U.S. dollar-based economy while maintaining the principles of decentralization and technology dependence of cryptocurrencies - but it has stumbled spectacularly.
There are many factors that contributed to the rise of the Terra network - prominent supporters, a compelling leader, the great bull market in crypto. But perhaps most important was its central promise. Do Kwon, founder of UST construction company Terraform Labs, built a whole galaxy of financial applications around his stablecoin - picking ideas from traditional and decentralized finance.
It was the whole package: a "stable" asset, a variety of lending and savings technologies, and even an exchange. Most, if not all, of these activities were on the riskier side of legal. But the dangers were worth it to Kwon, who wants finance to be freely available - against the constraints of the law and, as it turns out, blockchain technology.
It's reasonable to view this situation as representative of cryptocurrency. The current UST crisis, even if it recovers, will be a stain on pure algos. Others might ask a broader question: Where are all the experiments leading? Should we pack our bags?
The story of how or why Terra's cosmos imploded is not yet clear - it could have been an orchestrated attack that exploited known problems in the network, or a collapse of trust in the community after it came under mild pressure. But it's clear enough that if this could happen to Terra, other decentralized networks could be similarly at risk.
So if decentralized networks have natural limits (and they do) and can be open to economic exploitation (and they are, from the start), are the risks worth it?
Ryan Broderick, a Boston-based blogger who writes about Internet ephemera, raised a similar question in a recent essay on Web 2. The argument in that article, "No ads, no games, no gimmicks, no money," is that there is a contradiction in the Web as we know it.
The Internet is best because it is open and free. But the Internet also requires an architecture that needs to be built and maintained. So far, the only reliable way we've found to fund these activities is through applications that make the Internet less open and less free, Broderick argues.
He's referring to the Web giants - Google, Facebook, Amazon and others - that develop the tools we use most. These applications aren't free, of course, though they don't always come with a price tag. We pay for robust Internet services with hidden costs: data mining, social discord ... You know the argument.
Broderick also argues that part of Web 2's success is due to masses of people somehow abusing the platforms or finding a use for them that wasn't intended. He referred to TikTok as "free Adobe Premiere for your phone" and YouTube as "the Internet's premier hub for cultural criticism," rather than a social media service.
"Web 2.0 applications don't even know what they're actually being used for half the time," he argued. That's a powerful thought that underscores the value of the Internet because it's open and free and open to experimentation, even if it comes at a cost.
Broderick writes because he believes this model - call it surveillance capitalism meets unintended design - is unsustainable. There's also something on the horizon that worries him, though he never names it.
Web 3 promises an alternative to the extractive model of the Web - one where users don't have to rely on the benevolence of wealthy corporations to build, or not destroy, the platforms we use - because it's supposed to be "community owned."
If Web 3's developers and backers are to be believed, the advantage is that the Internet can remain open. It may not be "free," but the cost could be clear. That is, if it doesn't explode.