The implosion of the algorithmic stablecoin TerraUSD and its sister Luna token sent shockwaves through the cryptosphere, causing prices to crash and the entire ecosystem chasing the coins.
The fallout also reached across geographic areas. Based in Bengaluru, India, Stader Labs is one of several crypto startups that have been swept by the crisis.
Stader, backed by investors including Three Arrows Capital, had built a lucrative business that provided a platform for so-called staking, in which holders let their tokens be used to order transactions on a blockchain in exchange for earning returns. Before the crash, almost all of that business came from the Luna coin, which, like TerraUSD, ran on the Terra blockchain and hit an all-time high in early April.
When TerraUSD (UST) collapsed from its target 1-to-1 peg to the dollar this month and dragged Luna along, the impact on Stader’s business was rapid. The total value locked onto the protocol has fallen to $50 million from about $750 million just before the event, data from industry tracker DeFi Llama shows.
“We had a 40% drop in revenue,” co-founder and Chief Executive Officer Amitej Gajjala said in a text message. Stader’s monthly fees for the protocol had reached $6.3 million before the crash, he said.
Gajjala’s experience highlights the dangers lurking in the decentralized financial space, where crypto holders borrow, lend and wager coins without intermediaries such as banks. Due to the nature of the link with UST, Luna’s price has fallen close to zero, evaporating betting of the coin on platforms such as Stader.
To some extent, the Terra implosion also underscores the crypto sector’s ability to spin quickly after a major shakeout.
Stader is already in rebuilding mode, Gajjala said. After it started in April last year, fully focused on the Terra ecosystem, shortly before the UST crisis, it started expanding into rival blockchains such as Fantom, Polygon and Hedera – a process that Gajjala is now accelerating. The company will soon be rolling out on Ethereum, Solana, Cosmos and Near.
There is still a long way to go. Stader has now pinned about $50 million in total value on Hedera, according to DeFi Llama. While DeFi Llama doesn’t show equivalent data for Fantom and Polygon, Stader’s website says it has staked $3.6 million and $2.4 million respectively on the two ecosystems.
Luna’s market value has fallen to about $840 million from more than $20 billion before the TerraUSD collapse, according to data from CoinGecko. UST has lost about $17.5 billion in value since its clutch crashed.
Gajjala said his startup has enough money to weather the storm. Stader has raised more than $40 million since its inception, enough to last more than 10 years, he estimates. In January, the Economic Times reported that Stader had raised $12.5 million in a financing round led by Three Arrows, which valued it at $450 million.
As for the lessons learned from the eruption of UST and the collapse of the Terra blockchain, Gajjala offers a fairly optimistic view. Still waiting for more details from Terra’s financier Terraform Labs on how the UST crash unfolded, he expressed optimism about Terra founder Do Kwon’s proposal to revive the blockchain.
The ecosystem can be rebuilt if Terraform Labs can keep its community of developers and users, he said.
“Algo stablecoins in its current form may not be the sustainable way in the short term,” said Gajjala. “In the long run, there is room for decentralized stablecoins, collateral or algorithmic.”
(Except for the headline, this story has not been edited by DailyExpertNews staff and has been published from a syndicated feed.)