According to Kwon, "At the end of this process, TerraLabs will follow the biological fate of all other organisms in the environment, which will be a good thing. We start from scratch and go back to where we started."

Terra Luna appears to be "from nothing and back to nothing", as does Kwon's ambition to build a decentralized network that will eventually govern itself.

Using a complex seesaw mechanism and a linked cryptocurrency called Terra Luna, TerraUSD is an algorithmic stablecoin designed to maintain parity with the U.S. dollar. The price of Luna is subject to change, although 1 TerraUSD should always be worth 1 USD. TerraUSD is effectively using Luna as a balance to back its USD peg. This is a balancing mechanism.

So, what caused Terra's value to fall below the $1 mark? Investors were initially attracted to Luna’s loan program called Anchor, which offered ridiculously high annual interest rates of around 20%. Also, there was a time when Anchor owned 75% of TerraUSD tokens.

However, things changed dramatically when large amounts of TerraUSD were suddenly withdrawn from Anchor based on reports of Terra switching from fixed to floating rates. Investors were warned and started selling their Terra tokens and exchanging them for other cryptocurrencies.

Most people start trading TerraUSD and Luna at this point. Finally, the supply of Luna increased dramatically and its price plummeted well below the fixed $1 price point. As more and more people dumped Terra's money, the balancing process collapsed, both Terra and Luna.

Additionally, Kwon boasted widely on Twitter and in interviews that its TerraUSD currency would never falter a week before UST lost its anchor to the U.S. dollar. But unfortunately, life has a way of humbling us all, and Kwons was destroyed by the algorithms he worked so hard and passionately on.

Consequences of the Terra Luna fire

When Terra Luna's value fell below $1, investors went wild as expected. It's equally disturbing and scary. Investors lost a staggering $40 billion due to Terra Network outage.

Many cryptocurrency exchanges, including Binance, have delisted the UST and Luna pairing. Kwon released plans to restore the Terra ecosystem on May 16. The Terra chain was forked into a new chain without an algorithmic stablecoin. Not sure if this will go away and if the terra environment will recover.

More than 2,000 investors later filed a class-action lawsuit against Do Kwon, and the SEC launched a separate investigation into possible money laundering.

A financial crime team is also working on the ongoing Terra/Luna collapse in South Korea. The Seoul Prosecutor's Office has issued travel restrictions on former employees of Terraform Labs Pte Ltd.

There are several reasons why Quan should be held responsible for what appears to be willful ignorance. Many victims wondered why Quan had not gone to jail yet.