The UST crash: what happened / what's next?
GM, we take the latest Web3 news and translate it into plain old English - so you can stay up to date, without your eyes glazing over.
In today’s edition:
The UST crash: what happened and what comes next?
Google Maps, but on Mars and in the Metaverse...
RESOURCE: Feeling lost with our first article? Get UST and LUNA explained in ~12 mins
Bitcoin just became harder AND less profitable to mine, here's why...
Terms used (click for translation):
Stablecoins, Metaverse.
The UST crash: what happened and what comes next?
Did you ever try and catch Santa Claus when you were a kid?
Either by staying up late, or say, setting an alarm on your Star Wars watch for 11:30pm?
Well, take it from us:
When find your milk-mustachioed father halfway through the plate of Oreos you left out - the illusion breaks and a little bit of magic goes with it.
That's kind of how we're feeling with Terra's LUNA right now.
(weirdly dramatic, but we're standing by it).
Last week we wrote an article titled 'ICYMI Luna are doing something kinda genius...'
Famous last words.
LUNA's UST stablecoin was designed to keep its price pegged to $1 USD in value.
...to quote ourselves:
"But what if everyone sells their UST coin at once, collapsing its price and rendering it worthless?
Well, Terraform Labs have been buying up the digital equivalent of gold (Bitcoin) as a safeguard.
The idea being that if they need to help stabilize the UST price and buy a bunch of their own coin to counteract any dangerous selling pressure - they can use their Bitcoin reserves to do so."
Well, after the recent market crash, this theory was tested and...it turns out Santa isn't real.
Over the past 24hrs, a lot of folks have sold their UST.
As a result, Terraform Labs pulled $1.5 billion dollars worth of Bitcoin from their reserves to try and stabilize their coin price.
It might have softened the crash, but it didn't stop it - with UST bottoming out at 0.65c USD (as of this writing).
While most stablecoins stayed steady (because they use real US dollars as their reserve asset), Terra's 'crypto only' approach meant that, as their stablecoin fell with the market, so did the price of their reserve asset (BTC).
It's not great.
So what happens next?
Well, Janet Yellen (the US Treasury Secretary), has said she intends to regulate all stablecoins by the end of the year.
Stating that while digital assets “promote innovation,” they can also “present risks to the financial system.”
Makes sense. But let's just hope the regulation is fair and balanced, because stablecoins play a BIG role in crypto.
Google Maps, but on Mars and in the metaverse...
Ok, let's put a pause on the doom & gloom for a minute and indulge in a little fun/cool/nerdy distraction.
EPIC Games (known for their 'Unreal' 3D graphics engine) are partnering with NASA (known for putting a man on the moon) to:
'Build a challenge for developers to help create a Martian Metaverse experience'.
The challenge will reward the winners with a combined prize pool of $70,000, spread across twenty individual prizes ($6k on average per prize fro each category).
The goal of the Mars Metaverse will be to facilitate training exercises, with five different categories to participate in:
Set Up Camp
Scientific Research
Maintenance
Exploration
Blow Our Minds
(We didn't make up category 5, that's direct from NASA)
Is anyone else envisioning an interactive Google Maps, but on Mars and in the Metaverse?
All we're hearing is: it's cheaper than actually going to Mars, with waaay less radiation exposure.
Count us in.
Resource of the day
Feeling lost with our first article?
Get UST and LUNA explained in ~12 mins
Bitcoin just became harder AND less profitable to mine, here's why...
Ready for an over simplification of Bitcoin mining?
Alright, let's do this:
Every 10 mins, miners compete to solve a complex math problem, using big warehouse-sized computers.
First to solve the problem gets to process the next group (or 'block') of Bitcoin transactions.
After the block is successfully processed, the miner is rewarded with Bitcoin (the current reward is 6.25 Bitcoin, or ~$187.5K per block).
The system ensures that only one block is mined every 10 mins, to ensure that miners can't flood the market with newly earned Bitcoin, lowering its scarcity and crashing its price.
To make sure Bitcoin keeps to the rhythm of one block of transactions every 10 mins, the difficulty of the math problem changes.
Not enough miners online? Need to speed things up?
Incentivize them to join by making the math problem easier to solve. This not only makes it easier for them to win, but also requires less computing power - which saves on energy costs.
Too many miners online? Need to slow things down?
Do the opposite and make the math problem harder.
Right now the latter is happening.
Mining difficulty is about to reach an all-time high, all while Bitcoin's price is slumping - making the 6.25 BTC reward worth a little less than it was a week ago.
Don't worry, it's all by design, here's the thinking:
Make it more costly to mine -> some miners leave -> lowering competition -> the remaining miners win more transactions -> mining stays profitable -> the Bitcoin network keeps running.
It's a neat system!
Satoshi was (dare we say it), kinda genius.
Your Daily Dose of Web3
Michael Saylor suggests MicroStrategy will never sell its Bitcoin
Coinbase shares plunge after company misses Q1 revenue targets and posts $430M loss
Crypto downturn shakes digital collectible markets as NFT sales slip 42% lower than last week
Altcoins stage a relief rally while Bitcoin traders decide whether to buy the dip
Alright, that’s it for today!
Love to the family,