LUNC Needs a Product Vision
What is LUNC's defining product? What is its product-market fit?
Over the last 8 months, the LUNA/LUNC community accomplished a lot, underneath a Spanish sitcom’s worth of drama.1 A huge new community formed out of thin air, restored staking to a broken chain, entrusted a flawed leadership set, passed some bad policy, mostly reversed the bad policy, and purged its two worst personality cults (Terra Rebels and Vegas) at a very low dollar cost to the chain ($150k), but a high cost in lost time (4 months’ worth of finite staking rewards, around USD $15m+) and lost momentum.
Today, although the community is significantly smaller than it used to be, it remains extremely active, engaged, and full of potential.
Thanks for reading Alex’s Substack! Subscribe for free to receive new posts and support my work.
Underneath the noisy surface-level drama of Twitter and Discord wars over various community leaders’ brands, USTC vs USTN, Terra Rebels/Vegas vs. everyone else, etc, a more intellectual debate has simmered between a few hundred of the most passionate contributors to the community. This debate can be summed up as:
2 years from now, what use-case/need will Luna Classic meet, that makes it the go-to base operating system for that use-case?
What will LUNC do that will make you need to use it?
What should Luna Classic’s killer app(s) be, that makes it different from the 10,000 other ethereum-competitor alt-L1 blockchains?
VC, tech-dev, & investor types have a term for this “what should we build and how should we tailor it to the existing market landscape” issue bucket: product-market fit (PMF).
It’s an especially urgent question for LUNC and for the wider blockchain marketplace. Tens, maybe hundreds of thousands of blockchains exist today. 99.9% of these blockchains are ghost cloud computing networks whose computers have nothing to say to one another and provide no real-world utility.
Today, LUNC belongs in that 99.9% bucket.
The PMF question has been largely avoided by the L1 Joint Task Force, the de facto TFL successor entity that’s taken charge of blockchain development, but lurks beneath the surface of every major technical debate and intelligent governance proposal within the community.
To answer the question, what’s LUNC’s PMF? we need to consider what LUNC’s advantages and disadvantages are vs other chains, especially Cosmos chains.
Political decentralization: the LUNC community was able to identify and liquidate a pack of wolves in sheep’s clothing among its leadership, showing that the community has enough checks and balances to not be grifted into financial oblivion.
Short-term, this is more important than network decentralization (Nakamoto coefficient). Besides, the vast majority of alt-L1 chains are ultimately controlled by one corporation regardless of how elegantly decentralized their network/consensus architecture is.
Hyper-engaged core community: Although LUNC daily unique wallets are a shadow of what they were in the Aug/Sept heyday, LUNC still has a super-engaged core community. This is a potential marketing juggernaut if it’s ever given anything worth bragging about.
The high community engagement is downstream of high decentralization. High decentralization means lots of public fights about everything
TFL’s patronage: TFL, under indefinite legal siege, retained large pre-crash cash reserves. TFL would probably rather spend these on Good Deeds, like paying for LUNC’s infrastructure, than pay out bogus claims concocted by trial lawyers and victimization-hounds.
A twin moon: LUNC has high user engagement but no dapp ecosystem. LUNA, LUNC’s successor chain, has an impressive number of builders, but very few users. Some kind of “merge” of the underlying SDKs would positive-sum for both, if LUNA dapps could be copy-pasted over to LUNC in the future.
A powerful DeFi brand: Terra Classic remains, to this day, the most ambitious DeFi product ever devised (an undercollateralized algorithmic stablecoin), and easily the most widely adopted DeFi product ever created relative to its complexity. The idea retains significant appeal among many people in crypto despite its failure.
The Cosmos SDK. Cosmos is emerging as the clear winner in the “most credible alt-L1 competitive architecture vs Ethereum” battle, one of very few to gain developer share vs Ethereum during the 2022/23 downturn despite Ethereum’s massive network effects and broadening adoption of rollups.
Political decentralization: The same skepticism that makes a community hard to scam, makes it hard to rally around an ambitious, differentiating product vision. It also means lots of public fights over tiny issues (great for community education as people debate issues; terrible for actually getting stuff done)
Bad tech: LUNC today is a vanilla Cosmos SDK with a stranded native token (USTC) and a bunch of tech debt.
Zombie ecosystem: LUNC has very few functioning dapps. This is changing, slowly.
Poor state of community education: The LUNC burn movement attracted many users to the chain who are extremely new to crypto, and don’t understand basic differences between a blockchain and a centralized cloud-computing operating system, and what that means for the chain’s PMF.
A lack of PMF consensus within the L1 JTF. Which, to be fair, is not their main job.
Proposed killer apps: Code streaming (Zaradar), metaverse applications (various)
These are interesting ideas. The former is over my head. The latter is common to every chain, and I hope anybody who does it on LUNC crushes it (ideally with their own IP). It’s not clear to me how LUNC would be comparatively advantaged in any way with those, because LUNC starts from a bad place in terms of tech debt. The requirement to preserve state will probably restrict the degree to which LUNC can attain parity with other Cosmos chains without resorting to drastic measures, like L1-controlled pro-rata airdrops of dapp tokens in the modified state so that owners of the prior state’s dapp tokens aren’t screwed over. This topic is technically over my head, but was a major issue with USTC and the pending CosmWasm upgrade specifically.
LUNC does, of course, have its community, which is a key asset. But technologically, it doesn’t have any comparative advantage vs other Cosmos chains.
The old killer product - UST(C)
Before LUNA died, Terra had what many of us thought was a killer product: a decentralized stablecoin with BTC collateralization and a capital control system. Emphasizing this as a killer product would also be nice because (at least in our implementation) it wouldn’t require new technology or primitives. However, it also requires a level of unity and consensus that seems very far away from the LUNC community.
I believe that a decentralized unit of stable account could, with major evolutions from UST, still prove to be a killer product. Furthermore, LUNC’s 190,000 unique on-chain delegations have self-selected themselves to be an excellent target market for such a product. By buying in, they’ve all, to some degree, subscribed to that vision.
So we know many of the raw materials are there.
At the same time, a USTC fix is probably too controversial for the community to agree on a particular solution to it, and thus for the L1 JTF to pursue it. While a large majority of the community would like to see that happen, having everyone agree on one solution is a very different story! There’s also no good way to just “average” the different proposals, as they all work up from mutually-incompatible first principles. Steve Jobs didn’t build an iPhone by averaging a Nokia, a Blackberry and a Palm Pilot.
The one I/Ed/Max proposed puts the LUNC L1 at a (small imo, but real) risk of another meltdown if a) it scales to significant adoption, and then b) things start to go wrong. Other solutions discussed by Zaradar, Duncan Day, and others seem to have a lower level of blowup risk, but at extreme cost to their use-case & other drawbacks:
it’s extremely abstract, was never publicly discussed in technical detail, and seemingly never got any sustained collaboration from any DeFi specialists
nobody who worked closely on it at any point (including myself, Ed Kim, Max Bryan, and probably others) ever understood how it was supposed to work;
its “ban on minting” kills 2-way convertibility, which literally defeats the entire purpose of using it (why would you own a stablecoin that you couldn’t swap out of on-chain??);
a hypercomplex capital control system entangles the financial risk of LUNC/USTC with LUNC dapp tokens, which have completely different financial properties and systemic value
presumes the existence of arbitrages that don’t really exist at scale in the wild / price discrepancies are very often not “arbitrages” at all, they usually exist for real reasons that are only obvious later
also, by walking up USTC from its current price to $1 over time, you could never have a working borrow/lending market: borrowing funds in a token worth $.02 but being walked up to $1 over time is like borrowing $1M to buy a house, and having to repay the bank $50M when the loan is due / when re-peg is accomplished. Nobody in their right mind would do that.
In any case, the USTC/AFT question seems to have been superseded by other priorities like the L1 JTF’s technical workload
Also, Jacob Gadikian has commented in the past that he will have nothing to do with a stablecoin, presumably for regulatory liability reasons
Any proposed solution would be a highly complex product that would get pulled 10 different ways with every single governance proposal (and would probably require 50+ gov props).
So, those of us who believe in the potential of a (conservatively) undercollateralized, decentralized algorithmic unit of stable account should probably consider alternative approaches independent of LUNC governance in implementing it. Different groups should try different things, because there won’t be one right answer to the problem set.
The LUNC community would then be free to copy, adopt, or sync up with whatever solution it prefers at a later time, after that solution has proved itself in the wild enough to overcome the LUNC community’s fragmented state.
Fortunately, we think we’ve found several better approaches. So, in the next couple of posts, I will explore what I think are they are, and the pros and cons of each.
It will be not only beneficial, but essential, for multiple approaches to be tried, so that the community can compare and contrast the heavy tradeoffs each approach is required to make, in a way that’s tangible (like how different implementations respond to the same market crisis), not theoretical.
May 11-14, 2022
LUNA hyperinflates 8000x. Further delegation of tokens is suspended on May 13th, likely for legal liability / network security reasons, while LUNC founders start new chain (LUNA). This strips new LUNC buyers of any ability to influence the chain’s governance, and monopolizes voting power among individuals who had staked LUNA prior to May 13th.
May 20, 2022
DK launches a new LUNA blockchain, appearing to leave LUNC holders in the lurch.
2H May-July 2022
LUNC community explodes as 250k+ new memecoiners pile into LUNC. These memecoiners have a number of influencer-leaders, chiefly @LUNCDAO and @VegasMorph (‘Vegas’). These influencers are extremely valuable in rallying the suddenly much bigger LUNC community around 2 organizations (EK/Zaradar’s Terra Rebels and Vegas’s Luna Classic Community) committed to restoring staking and implementing an (all-but-impossible) 1.2% burntax on offchain transactions, chiefly on Binance.
The fact that the latter is basically impossible is by-and-large ignored by LUNC’s huge, heterogenous community and, incredibly, by LUNC community leadership.
Nonetheless, as a marketing ploy, the 1.2% burntax is so dumb that it’s actually genius: without any functioning ecosystem whatsoever, LUNC daily active wallets (on-chain only!) return to precrash levels, and LUNC astoundingly becomes the #1 Cosmos chain by market cap outside of ATOM in all on-chain activity metrics.
TR nearly implodes over a civil war between one half of the leadership (Ed, Zaradar, Marventus, myself, and most of the other team leads, vs Raider / Shinobi / Daolex). The latter group is eventually stripped of all admin privileges.
This event is hushed up to the validator set, which had rallied to TR after months of Vegas’s lobbying, so as not to jeopardize the all-important pending vote to transfer GH repo ownership from TFL to TR — the planned means of forcing the staking change into the blockchain’s code, despite TFL’s perceived non-cooperation at the time.
A mysterious hack of TR conveniently nukes all records of the Terra Rebels Discord server, erasing all records of the incident. ClanMudhorn, the admin of the prior server, spins up a new replacement.
Late August 2022
With 59-60% of validator votes publicly committing to TR’s effort, TFL agrees to implement TR’s proposed changes into the chain’s TFL-owned canonical LUNC repo, allowing TFL to avoid the public blow of stripped of canonical-repo ownership by the LUNC community. Do Kwon publicly supports LUNC revival efforts.
TR restores staking, restoring governance premium to the chain; LUNC + USTC combined market cap goes up >10x from effective postcrash low (~$350m to $5bn+).
Sept 8, 2022, 0845 EST
LUNC top-ticks at >$4bn USD market cap.
Sept 8, 2022, 0900 EST
Binance rejects participating in any off-chain burn tax. CZ says a burn tax is “not a good idea” in an AMA. LUNC drops 75% over the next 2.5wks.
Sept 20, 2022
TR goes ahead with on-chain burntax despite failure to get any meaningful participation from any CEXs. In an act of unexpected generosity, Binance commits to a LUNC subsidy equivalent to a ~.1% offchain burn (90% less than advertised). LUNC rallies 50% but the rally quickly fizzles.
The 1.2% burntax, authored by TR, breaks everything on the chain, volume collapses, all legacy dapps break or become unusable. On-chain volume drops 90%.
Terra Rebels and LCC centralize under 3 personalities (EK, Zaradar, Vegas), TR and LCC effectively merge.
A “TR Roadmap” is released. TR attempts to sell the community on a roadmap of technical milestones to restore functioning to the chain, as well as an undefined USTC re-peg.
A proposal from Akujiro and Duncan Day, loudly championed by me, to mostly repeal the burntax (reducing the 1.2% rate to .2% for transactions unrelated to staking or governance), passes. Ed Kim fixes previously unforeseen technical glitches with the burntax. On-chain volume doubles from lows, but most lost burntax volume fails to return.
Marventus, one of TR’s most respected members, quits.
Oct 3, 2022
Alex Forshaw, Max Bryan, and Ed Kim present the original “USTN Proposal” to salvage Terra Classic’s stablecoin. The document is downloaded or viewed over 30,000 times and sparks intense community discussion. Vegas and Faffy promise a “USTC proposal” within 2 weeks which never arrives. Zaradar publishes a vague outline of his own USTC proposal. Alex/Ed/Max propose a significantly modified final USTN proposal after 2 weeks of intensive community feedback, interviews, etc. No proposals gain enough community consensus to proceed.
Oct 28, 2022
Alex Forshaw and a slate of proposed multisig signers propose a $4m development & blockchain administration fund, funded by exogenous multisig assets located by Do Kwon and under multisig administrative control. Weeks of politicking pass, with no ultimate solution agreed upon by the community.
Ed Kim semiofficially quits Terra Rebels shortly after the Vegas/Neblio scandal.
Jacob Gadikian writes & delivers the Dragonberry patch for LUNC, fixing a major security vulnerability
Ed Kim, Gadikian, PFC and others fix IBC connectivity between the LUNC chain and other Cosmos chains, gradually repairing LUNC’s interoperability with other Cosmos chains.
TR releases an updated station and wallet. The update is not properly coordinated with a TFL wallet upgrade, causing the chain to be unusable for most of a day. TR pre-emptively blames TFL incompetence for the break. TR antagonists point out that TR broke the chain UX over a dapp that wasn’t needed or particularly asked for.
The remaining dev core of TR (Zaradar, Mostafa, Dan Gerhcovitch) quits TR after TR’s internal administrative mafia (Discord admins / Vegas / Raider / Echelon) confiscate $150,000 of community funds allotted for TR L1 development work.
TR founders w/ remaining legitimacy (EK, Zaradar), with non-TR outside help (Jacob Gadikian, TFL alumni, TCV’s Fragwuerdig and Man12) abort TR & reboot with a new organization, the “L1 Joint Task Force.”
LUNC on-chain daily active unique wallets settle at around 10k, from a postcrash high of 85k. Unique delegators settle at around 180k. LUNC’s market cap stabilizes around $1bn.