Terra LUNA’s Do Kwon was behind Basis Cash, a 2018 stablecoin that also crashed, ex-colleagues say

  • Do Kwon was one of the primary founders of Basis Cash, an algorithmic stablecoin project that crashed, before hopping on to build UST, which is looking shaky.
  • Kwon is under intense attack on social media, with the community reviving his posts in which he called his critics stupid and said DAI stablecoin would die at his hands.

There’s a no bigger story in crypto than the LUNA/UST debacle and the man squarely in the middle of it all is Do Kwon, the founder of Terraform Labs, the company that created UST, LUNA, the Mirror protocol, and a host of other crypto products. And to pile onto the bad month he’s having, his ex-colleagues have revealed he was one of the key people behind yet another failed algorithmic stablecoin project – Basis Cash.

A look at Do Kwon’s past on a failed stablecoin project

UST isn’t the first algorithmic stablecoin in crypto – far from it. In fact, it’s not the only one in the market today. Developers have been trying to build a stablecoin that relies on algorithms and smart contracts for some time now with varying success.

One of the earlier attempts was Basecoin, a project that attracted $133 million in funding from some big names like Andreessen Horowitz, Pantera Capital, and the Digital Currency Group. It later changed its name to Basis but after some time, it failed and refunded investors according to media reports in 2018.

The reason for its failure wasn’t a fault in its code or a market capitulation like in UST’s case. Rather, the founder, Nader Al-Naji claimed that any token that the stablecoin would use as its peg (like LUNA is being used by UST) would be dubbed a security by the SEC. Rather than wait for a battle he knew he would lose, Al-Naji decided to shut down the project.

(Al-Naji would later become the founder of BitClout, a blockchain social media project that was extremely controversial. You can read about it here and here).

Enters Do Kwon. The Korean picked up the code from Basis together with a group of colleagues and decided to revive it, despite the concerns raised by the original founder Al-Naji. Kwon called himself Rick, while the other top developer called himself Morty (alluding to the popular animated TV characters).

On August 20, 2020, Kwon, or Ricky in this case, wrote on the Basis Cash Telegram group:

Yo degens, anyone remember what Basis was? It was one of the early ‘DeFi’ algorithmic stablecoins with high ambitions, but it was shut down due to SEC-related risks. Today we’re bringing Basis back from the grave.

Back then, nobody outside the developers’ circle knew it was Do Kwon. After all, the crypto circle is rife with pseudonymous developers, including the biggest one of them all – Satoshi Nakamoto.

Some of these colleagues have come out to reveal that Kwon was the main force behind Basis. One of these is Hyungsuk Kang, a former engineer at Terraform Labs (TFL) who left for other projects. He revealed to CoinDesk that Kwon was the one who “wanted to just test it out. He said that this was a pilot project for doing that.”

Another developer who was part of the Basis Cash team also confirmed Kwon was Rick.

What’s curious is that Kwon has even made statements in which he distanced himself from Basis Cash, like this post on Twitter:

At the time, Kwon had major plans for the future of Basis Cash. In an interview in November 2020, he told one outlet:

In the long term, we look forward to seeing Basis Cash be used widely as a base layer primitive such that there is organic demand for the asset in many DeFi and commercial settings.

Basis Cash would later fail. In fact, even at its height, it only hit $174 million in total value locked, a far cry from Kwon’s other projects (Terra had hit $29 billion recently in TVL).

Crypto Twitter pulls no punches as it attacks Do Kwon

Amid his previous life being exposed, Kwon was the subject of ridicule on social media, with many mocking him for previous posts in which he has insulted and belittled his critics.

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Do Kwon has been extremely silent by his standards on social media ever since the prices of LUNA and UST started tanking. Previously, he was a big fan of Twitter and never let an opportunity to exchange ideas or even blows (not literally) pass him by.

The biggest attack, however, has been in regard to a March tweet in which Do Kwon claimed he would decimate DAI.

DAI is a stablecoin that’s built on Ethereum by MakerDAO, a DeFi protocol. Unlike UST, DAI is collateralized by US dollars in reserve, but since it’s maintained by a DeFi protocol, many have put it in the same category as UST. Do Kwon was claiming that the fast rise of UST would eat up DAI.

It couldn’t have been any more different. In fact, when UST price dipped to $0.3, DAI briefly surpassed the market cap of UST as its dollar peg remained steady.

Crypto Twitter took aim at Kwon for his DAI prophecy.

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Steve has been a blockchain writer for four years, and a crypto enthusiast for even longer. He is most excited by the application of blockchain to solve the challenges facing developing nations.

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