Q&A: the collapse of terra and what it could mean beyond crypto

Q&A: the collapse of terra and what it could mean beyond crypto

The collapse of a multibillion-dollar cryptocurrency called terra has sparked a wave of “fear, uncertainty and doubt” across the sector, leading some, like Coinbase’s chief executive, Brian Armstrong, to suggest the industry is heading for another “crypto winter”. But how did one coin stumbling cause such panic? And could a downturn spill into the wider economy?

The term cryptocurrency covers a broad swathe of digital assets all based on the same fundamental structure as bitcoin: a publicly available “blockchain” that records ownership without having any central authority in control. Advocates argue it allows for a truly censorship-resistant economy and, thanks to successor platforms such as ethereum, a new version of the web that allows for payments and ownership to be built in at the base level.

Critics counter that, more than a decade after bitcoin was created, the sector has yet to spawn an actually useful product, instead merely enabling the creation of a wave of speculative bubbles and zero-sum gambling that has lost some retail investors as much money as it has made for others.