A debate has sparked online about whether or not Do Kwon’s BTC haul meets the Bitcoin (purity) standard. Covered: Bitcoin Maximalists Question Kwon Hypocrisy or Legitimate Criticism? Bitcoin Maximalists Question Kwon Do Kwon, the man behind Terra has become the new Elon Musk of sorts. One tweet or one move can move the market. On […] The post Fierce Debate Sparked Over Terra’s Bitcoin Reserve Plans appeared first on CryptosRus.

Fierce Debate Sparked Over Terra’s Bitcoin Reserve Plans

A debate has sparked online about whether or not Do Kwon’s BTC haul meets the Bitcoin (purity) standard.

Covered:

  • Bitcoin Maximalists Question Kwon
  • Hypocrisy or Legitimate Criticism?

Bitcoin Maximalists Question Kwon

Do Kwon, the man behind Terra has become the new Elon Musk of sorts. One tweet or one move can move the market. On March 14th he tweeted out that Terra, and specifically UST, would purchase 10 billion dollars worth of Bitcoin to keep as reserves and an insurance policy to ensure UST maintains its peg. More on that, here.

This has definitely pumped the Bitcoin price over the last few days, which is up ~4% at press time sitting at just below $43,000. Kwon has already made good on part of his promise, telling Udi Wertheimer in a recent Twitter space that UST will be backed by bitcoin and luna. Moreover, sleuths have already tracked down a $125 million dollar Bitcoin purchase from Kwon.

Rather ironically, some maximalists such as the legendary Adam Back are raising questions about the buy, sparking a debate on Twitter. Back is famous for creating HashCash in 1997, which invented proof-of-work mining. As you may have noticed in the first tweet, Adam simply asked Kwon “where is the money coming from?”

Kwon responded about the sourcing of the money for the reserve, telling Back it’s mainly going to come from “seignorage” fees, which presumably means the fees generated by minting UST. The real debate comes from the next point Back raised, which is about “pre-mined” tokens.

Calling the supply pre-mined is simply used to critique crypto assets that mint the entire token supply prior to the ICO, which is then allocated accordingly between VCs, the team, or a foundation. This is how it’s done in 99% of token releases and vesting schedules because nearly all tokens in the market are not mined.

Bitcoiners like Back see this as outright fraud, deeming it a scheme to print money out of thin air. Bitcoin maximalists, Back being hands down the most prominent in the world, argue that Bitcoin, which had no VC funding, no token allocations to founders, and no “price pump ICO’s” will always be purer because the first coins were mined with hash power, not minted out of thin air.

Hypocrisy or Legitimate Criticism?

Kwon took a bit of offense to the pre-mine jab, but as mentioned above, any proof-of-stake coin is by nature “pre-mined” as it were. Kwon went on to mention that saying LUNA/UST is illiquid is “factually wrong.” Other maximalists have come out, whether trolling or not, and hinted that they are okay with a potential “Ponzi” pumping Bitcoin.

Udi Wertheimer, an OG Bitcoin developer, came out swinging at the maximalists by pointing out their hypocrisy in criticizing the stability of Terra’s algorithmic stablecoin while promoting the El-Salvador “junk bonds”. Of course, no BTC maximalist seems to care either when Tether “prints” USDT.

After Back’s back and forth with Kwon, he still accuses that the 3 billion to create the Bitcoin reserve for UST is not above board. He made the accusation that Terra and Kwon have fractionalized their reserve, leveraging the funds to buy the Bitcoin.

It appears the main gripe is using the legacy banking system, fiat tactics to create inflated liquidity which potentially harms the reserve if the algorithmic stablecoin went off the peg and collapsed. While capitalizing the reserve via Bitcoin is aimed at mitigating such issues, people like Back probably think it could be bad PR for Bitcoin if it goes south.

Others have simply argued Kwon is wise to see Bitcoin as the best reserve asset, which will give UST stability, pegged to BTC rather than fiat. In many ways, this type of move by Terra is exactly what the maximalists have been clamoring for. If Bitcoin can make Terra stronger, then that seems like a symbiotic relationship no one could be against.

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