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UST’s Do Kwon Was Behind Earlier Failed Stablecoin, Ex-Terra Colleagues Say
Basis Cash, an algorithmic stablecoin project founded by the anonymous “Rick” and “Morty” in 2020, was actually the work of Terraform Labs employees.
Himanshu S.
4:34 11th May, 2022

Do Kwon, the CEO of Terra creator Terraform Labs, was one of the pseudonymous co-founders behind the failed algorithmic stablecoin Basis Cash.

Basis Cash (BAC) was a closely watched revival in decentralized finance (DeFi) circles when it launched on Ethereum in late 2020, just before the launch of terraUSD (UST), Terra’s flagship stablecoin. Like UST, BAC sought to maintain a $1 peg through code, not collateral.

But it failed: The token of this long-abandoned project never achieved its target of dollar parity, sank below $1 in early 2021 and was trading well below 1 cent on Wednesday. Now history appears to be repeating: Over the last three days, UST sank precipitously below its peg, going as low as 27 cents in early morning U.S. hours Wednesday.

UST’s depegging has shocked crypto markets and regulators alike as the once-$15 billion stablecoin has continued its downward spiral. While BAC’s $54.5 million footprint was far smaller in impact, it offers a historical data point for observers grappling with the feasibility of algorithmic stablecoins.

Hyungsuk Kang, a former engineer at Terraform Labs (TFL), said Basis Cash was, in fact, a side project from some of Terra’s early creators, including himself and Kwon. Kang ultimately left TFL to build a Terra competitor called Standard Protocol.

“Basis Cash wasn’t tested at the moment, and we weren’t even sure” it would work, Kang said. Kwon “wanted to just test it out. He said that this was a pilot project for doing that.”

Another Basis Cash builder who spoke to CoinDesk on condition of anonymity confirmed that Do Kwon and TFL employees were behind the project.

Both Kang and the anonymous employee said Kwon was “Rick Sanchez,” the pseudonymous co-founder. CoinDesk also reviewed internal “Basis Cash Korea (BCK)” chat logs in which Kwon alludes to himself as “Rick.”

(Kwon and his Basis Cash co-founder “Morty” borrowed their pseudonyms from the popular animated TV show “Rick and Morty.”)

Basis Cash never reached the heights of other Kwon-linked crypto projects. Its total value locked (TVL) briefly peaked at $174 million in February 2021, two orders of magnitude below Terra’s $30 billion TVL before this week’s historic sell-off.

Our default position is to respect the privacy of pseudonymous actors with established reputations under their well-known handles unless there is an overwhelming public interest in revealing their real-world identities.

In this case, there is such public interest as Kwon’s UST stablecoin death spirals, wreaking havoc across the broader cryptocurrency market. Amid this precarious situation, investors deserve to know that UST was not Kwon’s first attempt at making an algorithmic stablecoin work.


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