Terra / LUNA

Failure type: Insolvency
Date: May 2022
Reported loss: UST and LUNA lost effectively all of their value

What happened

TerraUSD was an algorithmic stablecoin that held its dollar peg not with reserves but with a mint-and-burn link to LUNA, the network's own volatile token: a UST below a dollar could always be exchanged for a dollar of newly created LUNA. In May 2022 the peg slipped and that mechanism worked in reverse — restoring it required minting ever more LUNA, which crushed LUNA's price and destroyed the very value the peg depended on. Both assets collapsed within days, and Terraform Labs and its founder later faced criminal and civil proceedings in the United States and South Korea.

What to take from it

A peg backed by a token the same system issues is circular. It holds while confidence holds and offers nothing to fall back on when confidence goes — which is the moment a stablecoin is supposed to be useful. High advertised yields on a stablecoin are a description of that risk, not a feature.

Dates and figures are widely reported public estimates from coverage at the time, not KripZen's own audited data.

Where it sits on the record

The documented exchange failures we track, in the order they happened.