French company Just Mining has suffered the costs of the collapse of the stablecoin terra usd (UST). His boss Owen Simonen is back at the event on BFM Business.
The collapse of the terra usd (UST) stablecoin has had consequences for the cryptocurrency ecosystem, including for companies that expose their customers to this stablecoin. French company Just Mining in particular has suffered costs as shown by BFM Crypto on vertical lending, with the company notably exposed to the seizure of 30% of the luna blockchain to generate interest in the protocol, as part of its products. lending.
In decentralized finance, there are liquidating pools that allow trading of several stablecoins, including UST, DAI, etc. When there was the fall of the underground vaults, the holders sold a lot of them which destabilized the liquidity pool. This resulted in a higher than expected exposure to terrestrial reservoirs, which increased from 30-40%.
At the BFM Bourse group this afternoon, its boss Owen Simonen gave details of what happened. Just Mining has 65,000 customers, and 4,000 of them are put into this lending product.
“As soon as the first peg was made, on May 10, it reallocated part of the money into decentralized finance, exposing us over 40%, even over 45% at some point. Immediately, we took the position to use part of the company’s equity to go back below 40% of exposure is off and on hold. And when we saw that it continued to drop, we launched an extraordinary contingency plan to call customers to educate them about the situation and take emergency action,” said Owen Simonen.
Concretely, Just Mining pumped in the company’s own money a second time to cover the lack of a peg in this part of the contract, up to $1,250 per customer, which covered 73% of all its customers in this contract: about 3,000 clients out of 4,000 that were placed in position and “there were only 27% of clients with risk related to the position we held in the lending product.”
As a reminder, the stablecoin the Terra Dollar (UST) is a arithmetic stablecoin, which maintains its parity with the dollar using an algorithm and a cryptocurrency. In terms of stablecoins, when the price of an asset goes up or down, the value of the stablecoin should match the latter. The promise is to keep parity permanently, ie 1 UST = $1. This currency peg is also called a “peg”. When there is a gap between the base value and the stablecoin value, it is called “decorrelation” or “loss of parity”.
The latter also takes the opportunity to recall that this “is not a discretionary management product: we can diversify funds for the client but cannot make a decision on his behalf”. The company gave its clients the option of staying or exiting their positions: 27% of the subject clients exited in the very short term, the first exited with a loss of 17% and 8% for those who initially exited. In the evening, others decided to go out the next day or stay, says Owen Simonen.
Will mining just hold up? This scenario affects only one of the sixty services provided by the company. His boss explains, “Despite our commitment to equality, we were not contractually required to do so, but it was part of our ethical stance. We want to be a partner to our clients.”
“We’ve put a portion of the unquestioned fund into any product for the platform and even the implementation and operation of the architecture. Of course, that’s a cost to many.” Now, for the latter, it’s time to “go on, we should take a step back and why not re-create a more solid product,” explains the latter, who believes that a sudden loss of the value of land in US dollars will have repercussions in decentralized finance.
Just Mining is not the only company involved in this scenario, all those offering bets or lending cryptocurrency can also be called to communicate in the coming days.