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Korean MPs scrutinize LUNA amidst legal proceedings

Korean lawmakers summon Daniel Shin for questioning amidst the LUNA fiasco investigation
Korean lawmakers summon Daniel Shin for questioning amidst the LUNA fiasco investigation

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Over the last couple of years, the blockchain industry has grown several times. While there has been a huge number of cryptocurrency projects that were introduced into the industry, none has caused the kind of controversy and reason for debates as LUNA has. In recent turn of events, Korean MPs scrutinize the LUNA fiasco further, by summoning co founder Daniel Shin.

Projects that thrived have been consistently building their infrastructure while also getting ready for the next bull run, while the others have been struggling financially, hoping to get help from other organizations in the sector. A majority of these projects had been doing exceptionally well during the last bull run and were expected to stay on top, contrary to the current scenario.

However, the market crash bought a major shift in the way investors viewed these projects. The demand for projects that had high potential overtook those whose growth was generally fueled by hype and popularity. Infact, major organizations and financial institutions have started embracing some of the top cryptocurrencies and planning to introduce them to their companies soon.

While this may be a positive thing to know, there is a completely different perspective to consider as well. Some of the top projects too have failed to keep up with their promises, which has gained extreme criticism from government organizations.

Following the major crash of LUNA where billions of dollars were wiped off, Korean MPs have been looking into the case with much scrutiny as well.

Korean Lawmakers Scrutinize LUNA further

The Korean MPs have decided to probe further into the matter, and scrutinize evidence and data provided by LUNA regarding their crash. Korea’s National Assembly’s financial audit committee has summoned LUNA co-founder Daniel Shin to appear as a “witness” on the crypto industry’s reaction to the crash of the Terra ecosystem in May of this year. It is expected that the committee will meet late next week.

Shin founded Chai, a payments company that previously worked with Terraform. As part of their ongoing investigation into Terra and Do Kwon, prosecutors raided his home in July. Do Kwon, founder of Terra, on the other hand, was said to be on the run, by the government. According to the prosecution, Kwon was evading justice and was issued an arrest warrant.

Kwon had shared the news on social media, mocking the press regarding the announcements.

What happened to LUNA?

LUNA(now LUNC) was the top offering from the Terra ecosystem and was one of the top cryptocurrencies in the industry at its peak. The project was based on a stablecoin system, where Terra’s stablecoin UST was supposed to be balanced with the dollar’s value by LUNA. However, more than $2 billion worth of UST was unstaked on 7th May due to various reasons, that caused the value of UST to suddenly go down.

This situation was taken advantage of by the investors, who were swapping UST worth $0.91 for $1 worth of LUNA tokens. Due to this, the value of LUNA also started falling considerably, which was leading to more worry among the investors. This went on till the project lost more than 99.99% of its value, and eventually got delisted from almost every major exchange it was previously being traded on.

This event was a major blow for investors as well as the entire cryptocurrency industry. It showcased a different side of sector which was initially unexpected. Billions of dollars were wiped out instantaneously, and a token that was held by thousands of holders created massive losses.

LUNA, which was trading at around $116 had shot down in price as low as $0.0001 within a month, which was ideally an unimaginable situation. The crash affected the entire market, and several other projects were questioned regarding the safety of their prices following this incident.

What is LUNA(now LUNC)?

Founded by Do Kwon originally in 2015, LUNA was Terra ecosystem’s native staking token. It was-

1) The Terra network’s method of paying transaction fees.

2) A mechanism for maintaining the UST(Terra’s stablecoin) peg.

3) Used for staking in Terra’s delegated proof of stake (DPoS) for validating network transactions.

4) Used to participate in the platform’s governance.

In simple terms, LUNA was a method to regulate the price of UST. For instance, if UST trades at a high price compared to its peg, this means that demand for the stablecoin is higher than supply. Therefore, UST’s supply should be increased in order to meet demand. By incentivizing users to mint UST and burn LUNA, the protocol lowers UST’s price and increases LUNA’s price (by reducing its supply). Until Terra trades at its target peg price, users continue to arbitrage.

However, after LUNA crashed, the token was renamed LUNC and the 2nd version of the ecosystem’s staking asset was named LUNA after the original token.

Where will LUNC move next?

In terms of price, the LUNC token has been doing considerably well, despite losing almost all of its value. While it is highly unlikely for the token to even reach $1, let alone its all-time high, LUNC is likely to give decent returns in the future for those who invest now too.

The main reason for this is the community. The fact that LUNA is still looking to restructure itself and build further has also gained appreciation. However, with the current situation where Korean MPs scrutinize LUNA’s legal proceedings causing an overall negative press for the company, it may be difficult to speculate on the short-term price action. At the time of writing, LUNC is trading at around $0.00029, with a market cap of $1.8 billion.

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