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Terra Classic: Mirror Protocol exploit again

 


Last week it became known that an exploit in the Mirror Protocol had occurred completely unnoticed in October 2021. The damage is estimated at 90 million US dollars and adds a special spice to the failure of Terra. The collapse of LUNA and the stablecoin UST is estimated to have burned around $60 billion.


Now someone seems to be cleaning up the scraps too, as activist "FatMan" tweeted that an additional $2 million has been withdrawn from a number of protocol pools.


The only consolation is that this only affects Terra Classic's already-failed blockchain. Just last weekend, Terra 2.0 started with a completely new blockchain, in which the new LUNA tokens were distributed via airdrop. Since then, the tokens of the old chain are listed under the ticker LUNC and those of the new chain under LUNA or LUNA2.


Mirror Protocol called SEC into action

With the Mirror Protocol it is possible to trade synthetic assets. These assets are primarily tokenized shares, the price of which is constantly updated via a so-called oracle. Therefore, the tokens ultimately perform the same price movements as the actual securities.


The advantage of this is constant access to the stock market, which no longer knows any borders and is only burdened by very low transaction fees. The US Securities and Exchange Commission saw this as a serious violation because, in their view, Do Kown and Terraform Labs were offering unregistered securities to US consumers.


As early as November 2021, it became clear that the SEC was investigating Terra . Now, together with the crash of LUNA and UST, the whole matter should become even more interesting for the US authorities.


The case affects the entire industry

Since the catastrophic crash, many experts and market observers have been wondering why Do Kwon has so far simply been able to continue to do as he pleases. In fact, public perception is characterized by outrage at his personal behavior and the sometimes arrogant statements he made via Twitter in the weeks before the crash.


The legal assessment, on the other hand, is much more complex because Terra is definitely a piece of experimental software. It remains to be seen whether such a disclaimer will ultimately be sufficient to avert all claims from aggrieved investors.


In any case, the crypto industry is in the same boat as Terra. It can no longer help but also support Terra 2.0, because otherwise the entire sector would be considered a failure. This also explains why a number of exchanges participated in the release of LUNA2. If the tokenized bailout had not been triggered by airdrop, then there would probably have been no compensation, which would have been tantamount to a declaration of bankruptcy.

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