Basis Cash: The failed algorithmic stablecoin Do Kwon didn’t learn from

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CoinDesk has revealed billionaire Do Kwon was one of the two co-founders of Basis Cash, a failed algorithmic stablecoin project that preceded Terra — another Kwon creation that has infamously de-pegged from the US dollar this week. Kwon and his co-founder used the pseudonyms “Rick” and “Morty” in Basis Cash communications.

The failed project launched on the Ethereum network in late 2020 to much anticipation but never managed to maintain its peg of $1 for a sustained period. Basis Cash liquidity pool statistics indicate that investors still have 16,155,467 Basis Cash and 65,272 Basis Shares staked in abandoned liquidity pools.

Other Terraform Labs employees admitted involvement in the failed Basis Cash project. Engineer Hyungsuk Kang called it a side project that Do Kwon used as a “test.”

Even before CoinDesk revealed Kwon’s involvement on Wednesday, members of Basis Cash’s Telegram group sometimes spotted him in the group without his pseudonym of “Rick Sanchez.“

When asked what the billionaire was doing in the group, he reportedly and coyly replied, “I like studying new things. Especially old things that are new again.”

CoinDesk’s scoop unveiled the truth behind the multi-decabillion-dollar Terra Luna ecosystem.

Kwon is a South Korean citizen who has resided in South Korea, the US, and Singapore. He and the Terra Foundation are fighting legal battles with the Securities and Exchange Commission (SEC), including one lawsuit alleging that an SEC contractor improperly served him papers at an event in New York City.

Basis Cash borrowed its name from an earlier project called Basis. Formerly known as Basecoin, Basis raised $133 million in venture capital from organizations like a16z and Pantera Capital. In 2017, CoinDesk claimed that it found a draft whitepaper describing an algorithm that could adjust Basecoin’s market price by tracking an asset or index.

However, Basecoin/Basis removed the text from the Google Document that CoinDesk found. A link on Basecoin’s website now produces a “page not found” error.

Basis shut down due to regulatory concerns. Its legal experts advised founder Nader Al-Naji — known for founding one of crypto’s most hated projects, BitClout (CLOUT) — that its bond and share tokens would likely qualify as securities.

Basis faced strict regulations requiring that it limit the issuance of its bond and share tokens to accredited investors and require KYC/AML checks. Al-Naji said that Basis had very little wiggle room to implement its vision from a regulatory standpoint. He soon chose to shut down Basis and refund investors rather than risk a fight with the SEC.

Basis Cash claims to have been a decentralized spinoff of Nader Al-Naji’s original Basis. It uses three tokens with names similar to the ones used by Basis – Basis Cash, Basis Shares, and Basis Bond. It planned to issue more Basis Bonds whenever Basis Cash dropped below $1. However, Basis Cash is currently trading below $0.01 as a mostly abandoned project.

Basis was shut down by the same team.

Read more: Here’s how crypto’s third largest stablecoin Terra (UST) collapsed

After Basis, Nader Al-Naji founded BitClout under the pseudonym “DiamondHands” in March 2021. BitClout used an up-only bonding curve to guarantee early insiders a profit at the expense of everyday investors. The project later rebranded to Decentralized Social (DESO) after somebody revealed DiamondHands’ real identity and his ties to the failed Basis project. DeSo claims to somehow compete with Facebook.

Like Basis Cash before it, the similarly algorithmic stablecoin by Kwon TerraUSD (UST) is losing value and failing to hold its target peg of $1. UST and LUNA have shed more than 90% of their value in a single 24-hour period on May 11.

At press time, Terra’s desecrating de-peg effect on crypto markets has also begun to have knock-on effects for traditional stablecoins. The world’s largest stablecoin, Tether (USDT), de-pegged today to a low of $0.95. It’s trading at $0.98 currently.

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